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An unemployment insurance scheme for the euro area? A comparison of different alternatives using microdata

Author

Listed:
  • Mathias Dolls

    () (ZEW
    IZA)

  • Clemens Fuest

    (University of Munich
    CESifo)

  • Dirk Neumann

    (ZEW
    IZA
    OECD)

  • Andreas Peichl

    (ZEW
    IZA
    CESifo
    University of Mannheim)

Abstract

Abstract This is the first paper that assesses the importance of different stabilization channels of an unemployment insurance system for the euro area (EA). We provide insights into the potential added value of common unemployment insurance as a fiscal risk sharing device which crucially hinges on its ability to provide interregional smoothing. Running counterfactual simulations based on microdata for the period 2000–2013, we find that 10% of the income fluctuations due to transitions into and out of unemployment would have been cushioned through interregional smoothing at EA-level. Smoothing gains are unevenly distributed across countries, ranging from $${-5}$$ - 5 % in Malta to 22% in Latvia. Our results suggest that the interregional smoothing potential is as important as intertemporal smoothing through debt. We find that four member states would have been either a permanent net contributor or net recipient. Contingent benefits could limit the degree of cross-country redistribution, but might reduce desired insurance effects. We also study heterogeneous effects within countries and discuss moral hazard issues at the level of individuals, the administration and economic policy.

Suggested Citation

  • Mathias Dolls & Clemens Fuest & Dirk Neumann & Andreas Peichl, 2018. "An unemployment insurance scheme for the euro area? A comparison of different alternatives using microdata," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(1), pages 273-309, February.
  • Handle: RePEc:kap:itaxpf:v:25:y:2018:i:1:d:10.1007_s10797-017-9440-9
    DOI: 10.1007/s10797-017-9440-9
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    References listed on IDEAS

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    More about this item

    Keywords

    European fiscal integration; Unemployment insurance; Automatic stabilizers;

    JEL classification:

    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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