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Drowned by numbers? Stabilization properties of an EU-wide unemployment insurance system

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  • Etienne Farvaque
  • Florence Huart

Abstract

The recent crisis has given rise to proposals for the creation of a European unemployment insurance system. We simulate an EU-wide mechanism under various scenarios, varying methods of financing (common or country-specific contribution rates) and triggers for pay-outs (all time or contingent clauses). We analyse the impact of the system using different measures of stabilization under different fiscal multipliers. A system operating during bad times (periods where the increase in unemployment is large) would reduce GDP growth variability but also growth correlation among member countries. Hence, there is a trade-off between stabilization and synchronization of national business cycles.

Suggested Citation

  • Etienne Farvaque & Florence Huart, 2018. "Drowned by numbers? Stabilization properties of an EU-wide unemployment insurance system," Applied Economics, Taylor & Francis Journals, vol. 50(38), pages 4153-4181, August.
    • Handle: RePEc:taf:applec:v:50:y:2018:i:38:p:4153-4181
    DOI: 10.1080/00036846.2018.1441517
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