IDEAS home Printed from https://ideas.repec.org/p/zbw/zewdip/14095.html
   My bibliography  Save this paper

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

Author

Listed:
  • Dolls, Mathias
  • Fuest, Clemens
  • Neumann, Dirk
  • Peichl, Andreas

Abstract

We analyze different alternatives how a common unemployment insurance system for the euro area (EA) could be designed and assess their effectiveness to act as an insurance device in the presence of asymmetric macroeconomic shocks. Running counterfactual simulations based on micro data for the period 2000-13, we highlight and quantify the trade-off between automatic stabilization effects and the degree of cross-country transfers. In the baseline, we focus on a non-contingent scheme covering short-term unemployment and find that it would have absorbed a significant fraction of the unemployment shock in the recent crisis. However, 5 member states of the EA18 would have been either a permanent net contributor or net recipient. Our results suggest that claw-back mechanisms and contingent benefits could limit the degree of cross-country redistribution, but might reduce desired insurance effects. We also discuss moral hazard issues at the level of individuals, the administration and economic policy.

Suggested Citation

  • Dolls, Mathias & Fuest, Clemens & Neumann, Dirk & Peichl, Andreas, 2014. "An unemployment insurance scheme for the euro area? A comparison of different alternatives using micro data," ZEW Discussion Papers 14-095, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:14095
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/103544/1/802532926.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Dolls, Mathias & Fuest, Clemens & Peichl, Andreas, 2012. "Automatic stabilizers and economic crisis: US vs. Europe," Journal of Public Economics, Elsevier, vol. 96(3), pages 279-294.
    2. Davide Furceri & Aleksandra Zdzienicka, 2015. "The Euro Area Crisis: Need for a Supranational Fiscal Risk Sharing Mechanism?," Open Economies Review, Springer, vol. 26(4), pages 683-710, September.
    3. Sebastian Dullien & Ferdinand Fichtner & Peter Haan & Laslo Jaeger & Max Jansen & Richard Ochmann & Erik Tomasch, 2014. "Eine Arbeitslosenversicherung für den Euroraum als automatischer Stabilisator: Grenzen und Möglichkeiten," DIW Berlin: Politikberatung kompakt, DIW Berlin, German Institute for Economic Research, volume 86, number pbk86, November.
    4. Andrea Brandolini & Francesca Carta & Francesco D'Amuri, 2016. "A Feasible Unemployment-Based Shock Absorber for the Euro Area," Journal of Common Market Studies, Wiley Blackwell, vol. 54(5), pages 1123-1141, September.
    5. Walter Nicholson & Karen Needels & Heinrich Hock, 2014. "Unemployment Compensation During the Great Recession: Theory and Evidence," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(1), pages 187-218, March.
    6. Bargain, Olivier & Dolls, Mathias & Fuest, Clemens & Neumann, Dirk & Peichl, Andreas & Pestel, Nico & Siegloch, Sebastian, 2012. "Fiscal Union in Europe? Redistributive and Stabilising Effects of an EU Tax-Benefit System," IZA Discussion Papers 6585, Institute for the Study of Labor (IZA).
    7. Pierfederico Asdrubali & Bent E. Sørensen & Oved Yosha, 1996. "Channels of Interstate Risk Sharing: United States 1963–1990," The Quarterly Journal of Economics, Oxford University Press, vol. 111(4), pages 1081-1110.
    8. Craig, Steven G. & Hemissi, Wided & Mukherjee, Satadru & Sørensen, Bent E., 2016. "How do politicians save? Buffer-stock management of unemployment insurance finance," Journal of Urban Economics, Elsevier, vol. 93(C), pages 18-29.
    9. Mariña Fernández Salgado & Francesco Figari & Holly Sutherland & Alberto Tumino, 2014. "Welfare Compensation for Unemployment in the Great Recession," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(S1), pages 177-204, May.
    10. Fatas, Antonio & Mihov, Ilian, 2001. "Government size and automatic stabilizers: international and intranational evidence," Journal of International Economics, Elsevier, vol. 55(1), pages 3-28, October.
    11. Tullio Jappelli & Luigi Pistaferri, 2014. "Fiscal Policy and MPC Heterogeneity," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(4), pages 107-136, October.
    12. Olivier Bargain & Herwig Immervoll & Andreas Peichl & Sebastian Siegloch, 2012. "Distributional consequences of labor-demand shocks: the 2008–2009 recession in Germany," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(1), pages 118-138, February.
    13. Thomas J. Kniesner & James P. Ziliak, 2002. "Tax Reform and Automatic Stabilization," American Economic Review, American Economic Association, vol. 92(3), pages 590-612, June.
    14. Michael D. Bordo & Lars Jonung & Agnieszka Markiewicz, 2013. "A Fiscal Union for the Euro: Some Lessons from History ," CESifo Economic Studies, CESifo, vol. 59(3), pages 449-488, September.
    15. repec:cbo:report:43734 is not listed on IDEAS
    16. Bayoumi, Tamim & Masson, Paul R., 1995. "Fiscal flows in the United States and Canada: Lessons for monetary union in Europe," European Economic Review, Elsevier, vol. 39(2), pages 253-274, February.
    17. Wayne Vroman & Stephen A. Woodbury, 2014. "Financing Unemployment Insurance," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(1), pages 253-268, March.
    18. Forni, Mario & Reichlin, Lucrezia, 1999. "Risk and potential insurance in Europe," European Economic Review, Elsevier, vol. 43(7), pages 1237-1256, June.
    19. repec:mpr:mprres:8080 is not listed on IDEAS
    20. Dolls, Mathias & Fuest, Clemens & Heinemann, Friedrich & Peichl, Andreas, 2015. "Reconciling insurance with market discipline: A blueprint for a European fiscal union," ZEW Discussion Papers 15-044, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    21. Jara Tamayo, Holguer Xavier & Sutherland, Holly, 2014. "The implications of an EMU unemployment insurance scheme for supporting incomes," EUROMOD Working Papers EM5/14, EUROMOD at the Institute for Social and Economic Research.
    22. Andreas Peichl, 2009. "The benefits and problems of linking micro and macromodels - Evidence from a flat tax analysis," Journal of Applied Economics, Universidad del CEMA, vol. 12, pages 301-329, November.
    23. Olivier Bargain & Mathias Dolls & Clemens Fuest & Dirk Neumann & Andreas Peichl & Nico Pestel & Sebastian Siegloch, 2013. "Fiscal union in Europe? Redistributive and stabilizing effects of a European tax-benefit system and fiscal equalization mechanism," Economic Policy, CEPR;CES;MSH, vol. 28(75), pages 375-422, July.
    24. Holly Sutherland & Francesco Figari, 2013. "EUROMOD: the European Union tax-benefit microsimulation model," International Journal of Microsimulation, International Microsimulation Association, vol. 1(6), pages 4-26.
    25. repec:bla:revinw:v:60:y:2014:i::p:s177-s204 is not listed on IDEAS
    26. Luque, Jaime & Morelli, Massimo & Tavares, José, 2014. "A volatility-based theory of fiscal union desirability," Journal of Public Economics, Elsevier, vol. 112(C), pages 1-11.
    27. Alan J. Auerbach & Daniel R. Feenberg, 2000. "The Significance of Federal Taxes as Automatic Stabilizers," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 37-56, Summer.
    28. Congressional Budget Office, 2012. "Unemployment Insurance in the Wake of the Recent Recession," Reports 43734, Congressional Budget Office.
    29. Dolls, Mathias & Fuest, Clemens & Neumann, Dirk & Peichl, Andreas, 2014. "An Unemployment Insurance Scheme for the Euro Area," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100572, Verein für Socialpolitik / German Economic Association.
    30. Congressional Budget Office, 2012. "Unemployment Insurance in the Wake of the Recent Recession," Reports 43734, Congressional Budget Office.
    31. Herwig Immervoll & Horacio Levy & Christine Lietz & Daniela Mantovani & Holly Sutherland, 2006. "The sensitivity of poverty rates to macro-level changes in the European Union," Cambridge Journal of Economics, Oxford University Press, vol. 30(2), pages 181-199, March.
    32. Moyen, Stéphane & Stähler, Nikolai & Winkler, Fabian, 2016. "Optimal unemployment insurance and international risk sharing," Discussion Papers 33/2016, Deutsche Bundesbank.
    33. Grégory Claeys & Zsolt Darvas & Guntram B. Wolff, 2014. "Benefits and drawbacks of European Unemployment Insurance," Policy Briefs 847, Bruegel.
    34. James Feyrer & Bruce Sacerdote, 2013. "How Much Would US Style Fiscal Integration Buffer European Unemployment and Income Shocks? (A Comparative Empirical Analysis)," American Economic Review, American Economic Association, vol. 103(3), pages 125-128, May.
    35. Congressional Budget Office, 2012. "Unemployment Insurance in the Wake of the Recent Recession," Reports 43734, Congressional Budget Office.
    36. Peichl, Andreas, 2009. "Benefits and problems of linking micro and macro models - evidence from a flat tax analysis," ISER Working Paper Series 2009-02, Institute for Social and Economic Research.
    37. Jekaterina Navicke & Olga Rastrigina & Holly Sutherland, 2014. "Nowcasting Indicators of Poverty Risk in the European Union: A Microsimulation Approach," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 119(1), pages 101-119, October.
    38. Joseph A. Pechman, 1973. "Responsiveness of the Federal Individual Income Tax to Changes in Income," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(2), pages 385-428.
    39. Evers, Michael P., 2012. "Federal fiscal transfer rules in monetary unions," European Economic Review, Elsevier, vol. 56(3), pages 507-525.
    40. Mathias Dolls & Clemens Fuest & Friedrich Heinemann & Andreas Peichl, 2016. "Editor's Choice Reconciling Insurance with Market Discipline: a Blueprint for a European Fiscal Union," CESifo Economic Studies, CESifo, vol. 62(2), pages 210-231.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Boeri, Tito & Jimeno, Juan Francisco, 2015. "The unbearable divergence of unemployment in Europe," LSE Research Online Documents on Economics 65001, London School of Economics and Political Science, LSE Library.
    2. Hebous, Shafik & Weichenrieder, Alfons J., 2015. "Towards a fiscal union? On the acceptability of a fiscal transfer system in the eurozone," SAFE White Paper Series 28, Goethe University Frankfurt, Research Center SAFE - Sustainable Architecture for Finance in Europe.
    3. Blesse, Sebastian & Boyer, Pierre C. & Heinemann, Friedrich & Janeba, Eckhard, 2016. "Searching for a Franco-German consensus on the future of Europe: Survey results for Bundestag, Assemblée Nationale and Sénat," ZEW policy briefs 5/2016, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    4. repec:euf:pfremu:pfr-2017-01 is not listed on IDEAS
    5. Ramon Marimon, 2017. "On the Design of a European Unemployment Insurance Mechanism," 2017 Meeting Papers 1042, Society for Economic Dynamics.
    6. Cinzia Alcidi & Mathias Dolls & Clemens Fuest & Carla Krolage & Florian Neumeier, 2017. "The Nature of Shocks in the Eurozone and Their Absorption Channels," EconPol Policy Reports 3, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    7. Étienne Farvaque & Florence Huart, 2016. "Drowned by Numbers? Designing an EU-wide Unemployment Insurance," CIRANO Working Papers 2016s-33, CIRANO.
    8. Etienne Farvaque & Florence Huart, 2017. "A policymaker’s guide to a Euro area stabilization fund," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 34(1), pages 11-30, April.
    9. Andrea Brandolini & Francesca Carta & Francesco D'Amuri, 2016. "A Feasible Unemployment-Based Shock Absorber for the Euro Area," Journal of Common Market Studies, Wiley Blackwell, vol. 54(5), pages 1123-1141, September.
    10. Dolls, Mathias & Lewney, Richard, 2017. "Backward-looking analysis," ZEW Expertises, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research, number 149873.
    11. Anna Iara, 2016. "Revenue for EMU: A Contribution to the Debate on Fiscal Union," CESifo Economic Studies, CESifo, vol. 62(2), pages 301-331.
    12. Dolls, Mathias, 2016. "Chances and risks of a European unemployment benefit scheme," ZEW policy briefs 7/2016, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    13. Mathias Dolls & Nils Wehrhofer, 2018. "Attitudes towards Euro Area Reforms: Evidence from a Randomized Survey Experiment," EconPol Working Paper 11, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    14. repec:zbw:svrwjg:201718 is not listed on IDEAS
    15. Boeri, Tito & Jimeno, Juan F., 2016. "Learning from the Great Divergence in unemployment in Europe during the crisis," Labour Economics, Elsevier, vol. 41(C), pages 32-46.
    16. Stähler, Nikolai & Moyen, Stephane & Winkler, Fabian, 2016. "Optimal Unemployment Insurance and International Risk Sharing," Annual Conference 2016 (Augsburg): Demographic Change 145612, Verein für Socialpolitik / German Economic Association.
    17. Shafik Hebous & Alfons Weichenrieder, 2016. "Toward a Mutualization of European Unemployment Insurance? On Limiting the Downsides of a Fiscal Transfer System for the Eurozone," CESifo Economic Studies, CESifo, vol. 62(2), pages 376-395.
    18. Dolls, Mathias & Fuest, Clemens & Heinemann, Friedrich & Peichl, Andreas, 2015. "Reconciling insurance with market discipline: A blueprint for a European fiscal union," ZEW Discussion Papers 15-044, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    19. repec:iza:izawol:journl:y:2017:n:390 is not listed on IDEAS
    20. repec:ces:ifodic:v:14:y:2016:i:1:p:19204335 is not listed on IDEAS
    21. Sachverständigenrat zur Begutachtung der Gesamtwirtschaftlichen Entwicklung (ed.), 2015. "Zukunftsfähigkeit in den Mittelpunkt. Jahresgutachten 2015/16," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201516.
    22. David Saha & Ronnie Schöb, 2015. "Unemployment Insurance in Unionized Labor Markets: Neither Ghent nor Centralized," CESifo Working Paper Series 5430, CESifo Group Munich.
    23. Dolls, Mathias & Fuest, Clemens & Kock, Jan & Peichl, Andreas & Wehrhöfer, Nils & Wittneben, Christian, 2014. "Abschlussbericht zu Forschungsvorhaben fe 5/14: "Automatic stabilizers in the Eurozone: Analysis of their effectiveness at the member state and euro area level and in international comparison&quo," ZEW Expertises, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research, number 111444.
    24. Mathias Dolls & Clemens Fuest & Dirk Neumann & Andreas Peichl, 2016. "A Basic Unemployment Insurance Scheme for the Euro Area," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 14(1), pages 55-60, 05.
    25. Blesse, Sebastian & Boyer, Pierre C. & Heinemann, Friedrich & Janeba, Eckhard & Raj, Anasuya, 2017. "European Monetary Union reform preferences of French and German parliamentarians," ZEW Discussion Papers 17-059, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:zewdip:14095. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics). General contact details of provider: http://edirc.repec.org/data/zemande.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.