We examine proposals to introduce in the European Community national insurance against unevenly distributed shocks. This would operate differently from tax and government spending activities that now yield regional insurance within countries, since the latter are mainly designed for other purposes such as income redistribution and general revenue-raising. According to our evidence, the appeal of such insurance is very limited because the risks are too highly correlated and there is an excessive chance that a country in difficulty would not receive aid. The costs of a continuing programme are likely to exceed the benefits.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
697.
Find related papers by JEL classification: F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
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