Automatic stabilizers and economic crisis: US vs. Europe

Mathias Dolls, Clemens Fuest and Andreas Peichl

Journal of Public Economics, 2012, vol. 96, issue 3, 279-294

Abstract: This paper analyzes the effectiveness of the tax and transfer systems in the EU and the US to provide income insurance through automatic stabilization in the recent economic crisis. We find that automatic stabilizers absorb 38% of a proportional income shock in the EU, compared to 32% in the US. In the case of an unemployment shock 47% of the shock is absorbed in the EU, compared to 34% in the US. This cushioning of disposable income leads to a demand stabilization of up to 30% in the EU and up to 20% in the US. There is large heterogeneity within the EU. Automatic stabilizers in Eastern and Southern Europe are much lower than in Central and Northern European countries. We also investigate whether countries with weak automatic stabilizers have enacted larger fiscal stimulus programs.

Keywords: Stabilization; Income insurance; Liquidity constraints; Fiscal stimulus (search for similar items in EconPapers)
JEL-codes: E32 E63 H2 H31 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (201)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272711001642
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Automatic Stabilizers and Economic Crisis: US vs. Europe (2010)
Working Paper: Automatic stabilisers and economic crisis: US vs Europe (2010)
Working Paper: Automatic Stabilizers and Economic Crisis: US vs. Europe (2010)
Working Paper: Automatic Stabilizers and Economic Crisis: US vs. Europe (2009)
Working Paper: Automatic Stabilizers and Economic Crisis: US vs. Europe (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:96:y:2012:i:3:p:279-294

DOI: 10.1016/j.jpubeco.2011.11.001

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().