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


Dolls, Mathias ; Fuest, Clemens ; Neumann, Dirk ; Peichl, Andreas


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URL: https://ub-madoc.bib.uni-mannheim.de/35291
URN: urn:nbn:de:bsz:180-madoc-352916
Document Type: Working paper
Year of publication: 2013
The title of a journal, publication series: ZEW Discussion Papers
Volume: 13-106
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: F55 , H23,
Keywords (English): European fiscal integration , redistribution , automatic stabilization
Abstract: 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.

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Dolls, Mathias ; Fuest, Clemens ; Neumann, Dirk ; Peichl, Andreas (2013) Fiscal integration in the eurozone : economic effects of two key scenarios. Open Access ZEW Discussion Papers Mannheim 13-106 [Working paper]
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