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An Unemployment Insurance Scheme for the Euro Area? A Comparison of Different Alternatives Using Micro Data

Author

Listed:
  • Mathias Dolls
  • Clemens Fuest
  • Dirk Neumann
  • Andreas Peichl
Abstract
We analyze different options for the design of a common unemployment insurance system for the euro area (EA). We assess their effectiveness to act as an insurance device in the presence of asymmetric macroeconomic shocks. Running counterfactual simulations based on micro data for the period 2000-13, we quantify the trade-off between automatic stabilization effects and the degree of cross-country transfers. In the baseline, we focus on a non-contingent scheme covering short-term unemployment and find that it would have absorbed a significant fraction of the unemployment shock in the recent crisis. However, four member states of the EA18 would have been either a permanent net contributor or net recipient. Our results suggest that contingent benefits could limit the degree of cross-country redistribution, but might reduce desired insur-ance effects. We also study heterogeneous effects within countries and discuss moral hazard issues at the level of individuals, the administration and economic policy.

Suggested Citation

  • Mathias Dolls & Clemens Fuest & Dirk Neumann & Andreas Peichl, 2015. "An Unemployment Insurance Scheme for the Euro Area? A Comparison of Different Alternatives Using Micro Data," CESifo Working Paper Series 5581, CESifo.
    • Handle: RePEc:ces:ceswps:_5581
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    References listed on IDEAS

    as
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    40. Dolls, Mathias & Fuest, Clemens & Neumann, Dirk & Peichl, Andreas, 2014. "An Unemployment Insurance Scheme for the Euro Area," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100572, Verein für Socialpolitik / German Economic Association.
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    More about this item

    Keywords

    European fiscal integration; unemployment insurance; automatic stabilizers;
    All these keywords.

    JEL classification:

    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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