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The Political Setting of Social Security Contributions in Europe in the Business Cycle

Toralf Pusch () and Ingmar Kumpmann

No 4/2011, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: Social security revenues are influenced by business cycle movements. In order to support the working of automatic stabilizers it would be necessary to calculate social insurance contribution rates independently from the state of the business cycle. This paper investigates whether European countries set social contribution rates according to such a rule. By means of VAR estimations, country-specific effects can be analyzed - in contrast to earlier studies which used a panel design. As a result, some countries under investigation seem to vary their social contribution rates in a procyclical way.

Keywords: Welfare state; procyclical policy; automatic stabilizers; social insurance; fiscal policy; European Union; business cycle; Sozialstaat; Konjunkturpolitik; automatische Stabilisatoren; Sozialversicherung; Finanzpolitik; Europäische Union; Konjunkturzyklus (search for similar items in EconPapers)
JEL-codes: E62 H53 H55 H75 J32 (search for similar items in EconPapers)
Date: 2011
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