Fiscal integration in the Eurozone: economic effects of two key scenarios

Publication type

EUROMOD Working Paper Series

Series Number

EM1/14

Series

EUROMOD Working Paper Series

Authors

Publication date

January 24, 2014

Summary:

The 2008-09 crisis has shown that some euro area member countries were unable to sufficiently stabilize their economies which has given rise to a debate about deeper fiscal integration in Europe. In this paper, we analyze the redistributive and stabilizing effects of two scenarios of fiscal integration in the Eurozone, namely the introduction of i) a joint tax and transfer system that replaces 10 per cent of national systems and ii) a system of fiscal equalization that equalizes 10 per cent of differences in taxing capacity. Based on the European tax-benefit calculator EUROMOD and representative household micro data for the current 17 euro area member states, our conceptual experiment shows that a joint tax and transfer system would only lead to moderate gains in terms of stabilization while redistribution would flow especially towards the Eastern European member states. In contrast, a fiscal equalization mechanism that redistributes revenues across countries could even lead to destabilizing effects.

Subjects

Paper download  

#522203

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