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Social Protection as an Automatic Stabilizer

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Author Info

  • Dolls, Mathias

    ()
    (University of Cologne)

  • Fuest, Clemens

    ()
    (University of Oxford)

  • Peichl, Andreas

    ()
    (IZA)

Abstract

This paper analyzes the effectiveness of social protection systems in Europe and the US to provide (income) insurance against macro level shocks in terms of automatic stabilizers. We find that automatic stabilizers absorb 38% of a proportional income shock and 47% of an idiosyncratic unemployment shock in Europe, compared to 32% and 34% in the US. There is large heterogeneity within Europe with stabilization being much lower in Eastern and Southern than in Central and Northern Europe. Our results suggest that social transfers, in particular the rather generous systems of unemployment insurance in Europe, play a key role for the stabilization of disposable incomes and explain a large part of the difference in automatic stabilizers between Europe and the US.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Policy Papers with number 18.

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Length: 21 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:iza:izapps:pp18

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Related research

Keywords: automatic stabilization; economic crisis; taxes and benefits;

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References

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  1. Reinhart, Carmen & Rogoff, Kenneth, 2009. "The Aftermath of Financial Crises," CEPR Discussion Papers 7209, C.E.P.R. Discussion Papers.
  2. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 1065-1188, November.
  3. Paul van den Noord, 2000. "The Size and Role of Automatic Fiscal Stabilizers in the 1990s and Beyond," OECD Economics Department Working Papers 230, OECD Publishing.
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Cited by:
  1. Khan, Haider A., 2011. "Human development and capabilities in MENA economies with special emphasis on Egypt," MPRA Paper 39381, University Library of Munich, Germany.

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