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Journal Article

Automatic stabilizers and economic crisis: US vs. Europe


Publication date

Apr 2012


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.

Published in

Journal of Public Economics

Volume and page numbers

96 , 279 -294





Welfare Benefits, Microsimulation, and Taxation



Albert Sloman Library Periodicals *restricted to Univ. Essex registered users*

Related publications

  1. Automatic stabilisers and economic crisis: US vs Europe

    Mathias Dolls, Clemens Fuest, and Andreas Peichl

    1. Welfare Benefits
    2. Microsimulation
    3. Taxation


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