How Much Would US Style Fiscal Integration Buffer European Unemployment and Income Shocks? (A Comparative Empirical Analysis) | Zendy

James Feyrer | Zendy; Bruce Sacerdote | Zendy

Open Access

How Much Would US Style Fiscal Integration Buffer European Unemployment and Income Shocks? (A Comparative Empirical Analysis)

Author(s) -

James Feyrer,

Bruce Sacerdote

Publication year - 2013

Publication title -

american economic review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 16.936

H-Index - 297

eISSN - 1944-7981

pISSN - 0002-8282

DOI - 10.1257/aer.103.3.125

Subject(s) - economics , unemployment , liberian dollar , shock (circulatory) , fiscal policy , fiscal union , european union , member states , macroeconomics , monetary economics , international economics , finance , medicine

We examine the degree to which federal fiscal integration smoothes income and unemployment shocks across US States. We find that roughly 25 cents of every dollar of income shock at the state level is offset by federal fiscal policy. This stabilization comes entirely through the Federal tax system, not through spending stabilizers, automatic or otherwise. If we apply a comparable amount of cross country stabilization to European Union countries (as exists across US States), Greece and Spain would be receiving additional transfers of 2.5 percent of GDP.

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