Automatic Stabilizers and Economic Crisis: US vs. Europe

Mathias Dolls, Clemens Fuest and Andreas Peichl

No 16275, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper analyzes the effectiveness of the tax and transfer systems in the European Union and the US to act as an automatic stabilizer in the current economic crisis. We find that automatic stabilizers absorb 38 per cent of a proportional income shock in the EU, compared to 32 per cent in the US. In the case of an unemployment shock 47 percent of the shock are absorbed in the EU, compared to 34 per cent in the US. This cushioning of disposable income leads to a demand stabilization of up to 30 per cent in the EU and up to 20 per cent 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. We find no evidence supporting this view.

JEL-codes: E32 H2 H31 (search for similar items in EconPapers)
Date: 2010-08
Note: EFG PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (58)

Published as 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.

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Related works:
Journal Article: Automatic stabilizers and economic crisis: US vs. Europe (2012)
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 (2009)
Working Paper: Automatic Stabilizers and Economic Crisis: US vs. Europe (2009)
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