Drowned by Numbers? Issues in Designing an EU-wide...
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Drowned by Numbers? Issues in Designing an EU-wide Unemployment Insurance ETIENNE FARVAQUE FLORENCE HUART Séminaire CIRANO- Montréal – Juin 2016 Contact: [email protected] http://lem-lille.univ-lille1.fr/
Transcript of Drowned by Numbers? Issues in Designing an EU-wide...
Drowned by Numbers? Issues in Designing an EU-wide
Unemployment Insurance
ETIENNEFARVAQUE FLORENCEHUART
Séminaire CIRANO- Montréal – Juin 2016
Contact: [email protected]
http://lem-lille.univ-lille1.fr/
1. Introduction: a topical question… ◦ Thecrisishasrevivedaques<onaddressedintheMcDougall(1977)andDelors(1986)reports
◦ Threereportsin2012aboutastabilisa<onschemeattheEuropeanlevel
o VanRompuyReport(“Towardsagenuineeconomicandmonetaryunion”):afiscalcapacityattheEMUlevel,eitherafederalbudgetoranunemploymentinsurancemechanism
o TommasoPadoa-Schioppagroup(“Comple7ngtheEuro.AroadmaptowardsfiscalunioninEurope”):acyclicalautoma<cstabiliza<oninsurancefund
o EuropeanCommission(“Ablueprintforadeepandgenuineeconomicandmonetaryunion.LaunchingaEuropeandebate”):
aEAbudgetwithastabiliza<onfunc<on2
o Proper<esofacommonstabiliza<onfundfortheEurozone:
o Carnotetal.(2015,ECEcon.papers),Delbecque(2013,),Enderleinetal.(2013),Furceri&Zdzienicka(2015,OpenEcon.Rev)
o Simula<onsoftheredistribu<onandstabiliza<oneffects:
o Bargainetal.(2013,Econ.Policy),Dollsetal.(2013)
o UnemploymentbenefitsintheEurozone
o advocatedbyCommissionerAndor(2014)
o Brandolinietal.(2016,JCMS),Dollsetal.(2014),Dullien(2014,InterEcon.),Fichtner&Haan(2014,DIWEcon.Bull.),Lellouche&Sode(2014,Tresor-Econ.)
o UnemploymentbenefitsintheEU
o Beblávy&Maselli(2014),Maselli&Beblávy(2015)3
1. Introduction: … attracting contributors
o Provideatheore<calcontext
o Oursimula<onscover27EUcountries,2005-2014…
o …underalargesetofparameters
o Giveafocusonstabiliza<on
o Reviewimplementa<onissuesanda“bullet-proof”test
o Providean“Easy-to-use”replica<onfile
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1. Introduction: our contributions
2. Theoretical background
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o Op<mumcurrencyareas(OCA):
o Desirabilityofasysteminsuringagainstidiosyncra<cshocks
o Ingram(1959,QJE),Kenen(1969)
o Kindleberger(1986,AER),Agliela(1986):onthesimilarityofpreferences
o Fiscalfederalism:
o Persson&Tabellini(1996a,Econ.):trade-offbetweenrisk-sharingandmoralhazard
o Persson&Tabellini(1996b,JPolE):trade-offbetweenefficiencyandredistribu<on
o Macroeconomicstabiliza<on:
o Engler&Voigts(2013):largerKeynesianmul<plier(lowerRicardianresponse)
2. Theoretical background
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o Poli<calEconomy
o Persson&Tabellini(1996b,JPolE):
o collec<vebargaining(betweenstates)->underinsurance
o majorityvo<ng(byindividuals)->over-insurance
o Luqueetal.(2014,JPubE):
scopeforbargainingincreaseswithexpectedvola<lityofincome
Larger/Richer/Lower-riskcountrieswillrequestlargerpoli<cal/vo<ngweights
o Guisoetal.(2016,JIE):
Culturalclashescanbecircumventedbycentraliza<on
Take-awaylesson:
thefurtherformanOCA,themoredesirableaninsurancesystem,buttheharderthebargainingontaxrates
3. Existing proposals / schemes
Prelim.: Where are we coming from?
The EU budget transfers
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o Permanentrecipients/receivers
o Forsizeableamounts
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3. Existing proposals / schemes 3.1. Basic formulas
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FromLelloucheandSode(2014):1. Benefits
1. Contribu<ons
2. NetTransfers
3. Definingthe“right”contribu<onrate,
balancingatthesystemlevel or ateachcountry’s?
3.2. Choice of parameters: a tricky issue …
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3.2. Choice of parameters: … for difficult comparisons
3.3. Net transfers: results from the literature
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Howevercomparisonsarehardtomake:methods,measurements,underlyingmodelsdiffer.Mul<plierosenconsideredequalto1.
4. Our proposal(s)
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o AllEUcountries(exceptCroa<a)
o 2005-2014(allowsforalargercoverage)
o Data:
o Eurostat:unemploymentrate,short-termunemployed
o AMECO:GDP,compensa<onperemployee
4. Our proposal(s)
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Baselinescenario:
α=0.8;EUaverageReplacementrate=0.46;Coveragera<o=100%
Contribu<onrate=common,updated/yeartobalancethefundoverpast3years
Permanentsystem(nospecifictrigger)
o Variant1:ReplacementRate=0.56
o Variant2:Na<onalReplacementRateifRR<EUaverage
o Variants3&5:Coveragera<o=80%
o Variant4:Replacementrate=0.56
o Variants4,5,7,9:Country-specificcontribu<onrate,updated/yeartobalancecountries’sharesofthefundoverpast3years
o Variants6&7:Trigger=Δu>10%
o Variant8&9:Trigger=u>5%AND20%abovethepasttwoyears’level
o Variant10:withoutDenmark&UK
4. Our proposal(s)
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4. Our proposal(s)
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4. Our proposal(s): where does variability comes from?
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4. Our proposal(s)
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5. Conclusion o AEuropeaninsuranceschemeforshort-termunemploymentisprobablynot
suitableincaseofaprotractedslowdown,becauseanincreasingshareoflong-termunemployedwouldnotbecovered.
o Ifallcountrieswereseverelyhitbyaprotractedcrisisatthesame<me,theEuropeaninsuranceschemewouldbeindeficit.
Ø Borrowingcapacity?
Ø Insuranceagainstlargeshocksonly(Gros,2014)?
o Furtherresearchisneededonstabiliza<oneffects,aswellasonwelfarecriteria.
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