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Fiscal Stabilization in the United States: Lessons for Monetary Unions
The debate about the use of fiscal instruments for macroeconomic stabilization has regained prominence in the aftermath of the Great Recession, and its relevance has suddenly increased further, after the recent Covid-19 shock. The analysis of fiscal stabilization in the United States, a monetary uni...
Autores principales: | , |
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Formato: | Online Artículo Texto |
Lenguaje: | English |
Publicado: |
Springer US
2022
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Materias: | |
Acceso en línea: | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8995923/ http://dx.doi.org/10.1007/s11079-022-09664-8 |
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author | Nikolov, Plamen Pasimeni, Paolo |
author_facet | Nikolov, Plamen Pasimeni, Paolo |
author_sort | Nikolov, Plamen |
collection | PubMed |
description | The debate about the use of fiscal instruments for macroeconomic stabilization has regained prominence in the aftermath of the Great Recession, and its relevance has suddenly increased further, after the recent Covid-19 shock. The analysis of fiscal stabilization in the United States, a monetary union equipped with a common fiscal capacity, has often informed the literature on the European EMU and could serve as a reference for its possible future reforms. This paper expands that literature in three ways: first, by measuring stabilization not only as inter-state risk-sharing of asymmetric shocks, but also as intertemporal stabilization of common shocks; second, by doing this for specific items in the US federal budget, both on the revenue and on the expenditure side; and third, by also measuring the impact of the federal system of unemployment benefits and of its extension as a response to the Great Recession. Corporate and personal income tax, on the revenue side, and social security benefits and federal grants, on the spending side, are the most effective items. The US federal system of unemployment insurance provides great stabilization in the event of a large shock, in particular when enhanced by the discretionary program of extended benefits. These findings imply that a proper design of the budget can maximize its stabilization effect, when it helps bridging the gap between higher mobility of capital and lower mobility of labor, by collecting revenues based on the income of the most mobile factor (corporate income tax) and providing support to the income of the least mobile factor (social security). |
format | Online Article Text |
id | pubmed-8995923 |
institution | National Center for Biotechnology Information |
language | English |
publishDate | 2022 |
publisher | Springer US |
record_format | MEDLINE/PubMed |
spelling | pubmed-89959232022-04-11 Fiscal Stabilization in the United States: Lessons for Monetary Unions Nikolov, Plamen Pasimeni, Paolo Open Econ Rev Research Article The debate about the use of fiscal instruments for macroeconomic stabilization has regained prominence in the aftermath of the Great Recession, and its relevance has suddenly increased further, after the recent Covid-19 shock. The analysis of fiscal stabilization in the United States, a monetary union equipped with a common fiscal capacity, has often informed the literature on the European EMU and could serve as a reference for its possible future reforms. This paper expands that literature in three ways: first, by measuring stabilization not only as inter-state risk-sharing of asymmetric shocks, but also as intertemporal stabilization of common shocks; second, by doing this for specific items in the US federal budget, both on the revenue and on the expenditure side; and third, by also measuring the impact of the federal system of unemployment benefits and of its extension as a response to the Great Recession. Corporate and personal income tax, on the revenue side, and social security benefits and federal grants, on the spending side, are the most effective items. The US federal system of unemployment insurance provides great stabilization in the event of a large shock, in particular when enhanced by the discretionary program of extended benefits. These findings imply that a proper design of the budget can maximize its stabilization effect, when it helps bridging the gap between higher mobility of capital and lower mobility of labor, by collecting revenues based on the income of the most mobile factor (corporate income tax) and providing support to the income of the least mobile factor (social security). Springer US 2022-04-11 2023 /pmc/articles/PMC8995923/ http://dx.doi.org/10.1007/s11079-022-09664-8 Text en © The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2022 This article is made available via the PMC Open Access Subset for unrestricted research re-use and secondary analysis in any form or by any means with acknowledgement of the original source. These permissions are granted for the duration of the World Health Organization (WHO) declaration of COVID-19 as a global pandemic. |
spellingShingle | Research Article Nikolov, Plamen Pasimeni, Paolo Fiscal Stabilization in the United States: Lessons for Monetary Unions |
title | Fiscal Stabilization in the United States: Lessons for Monetary Unions |
title_full | Fiscal Stabilization in the United States: Lessons for Monetary Unions |
title_fullStr | Fiscal Stabilization in the United States: Lessons for Monetary Unions |
title_full_unstemmed | Fiscal Stabilization in the United States: Lessons for Monetary Unions |
title_short | Fiscal Stabilization in the United States: Lessons for Monetary Unions |
title_sort | fiscal stabilization in the united states: lessons for monetary unions |
topic | Research Article |
url | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8995923/ http://dx.doi.org/10.1007/s11079-022-09664-8 |
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