Skip to content

Journal Article

Fiscal union in Europe? Redistributive and stabilizing effects of a European tax-benefit system and fiscal equalization mechanism

Authors

Publication date

Jul 2013

Summary

The current debt crisis has given rise to a debate concerning deeper fiscal integration in Europe. The view is widespread that moving towards a 'fiscal union' would have stabilizing effects in case of macroeconomic shocks. We study the economic effects of introducing two elements of a fiscal union: an EU-wide tax and transfer system and a fiscal equalization mechanism. Using the European tax-benefit calculator EUROMOD, we exploit representative household micro data from 11 eurozone countries to simulate these policy reforms and study their effects on the income distribution and automatic stabilizers. We find that replacing one third of the national tax-benefit systems with a European system would lead to significant redistributive effects both within and across countries. These effects depend on income levels and the structures of existing national systems. The EU system would particularly improve fiscal stabilization in credit constrained countries absorbing 10-15% of a macroeconomic income shock. Introducing a fiscal equalization mechanism would redistribute revenues from high to low income countries. However, the stabilization properties of this system are ambiguous. The results suggest that it might be necessary for Europe to explore alternative ways of improving macroeconomic stability without redistributing income ex ante. - Olivier Bargain, Mathias Dolls, Clemens Fuest, Dirk Neumann, Andreas Peichl, Nico Pestel and Sebastian Siegloch[ABSTRACT FROM AUTHOR]

Published in

Economic Policy

Volume and page numbers

28 , 375 -422

DOI

http://dx.doi.org/10.1111/1468-0327.12011

ISSN

16

Subjects

Welfare Benefits, Microsimulation, Taxation, Finance, and International Economic Relations

Links

http://serlib0.essex.ac.uk/record=b1597356~S5

Notes

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


Related publications

  1. Fiscal union in Europe? Redistributive and stabilising effects of an EU tax-benefit system

    Olivier Bargain, Mathias Dolls, Clemens Fuest, et al.

    1. Welfare Benefits
    2. Microsimulation
    3. Taxation
    4. Finance
    5. International Economic Relations
  2. Fiscal union in Europe? Redistributive and stabilising effects of a European tax-benefit system and fiscal equalisation mechanism

    Olivier Bargain, Mathias Dolls, Clemens Fuest, et al.

    1. Welfare Benefits
    2. Microsimulation
    3. Taxation
    4. Finance
    5. International Economic Relations
  3. Fiscal union in Europe? Redistributive and stabilising effects of an EU tax-benefit system

    Olivier Bargain, Mathias Dolls, Clemens Fuest, et al.

    1. Welfare Benefits
    2. Microsimulation
    3. Taxation
    4. Finance
    5. International Economic Relations

#521763


Research home

Research home

News

Latest findings, new research

Publications search

Search all research by subject and author

Podcasts

Researchers discuss their findings and what they mean for society

Projects

Background and context, methods and data, aims and outputs

Events

Conferences, seminars and workshops

Survey methodology

Specialist research, practice and study

Taking the long view

ISER's annual report

Themes

Key research themes and areas of interest