DP697 National Insurance Against Unevenly Distributed Shocks in a European Monetary Union
|Author(s):||Jacques Melitz, Silvia Vori|
|Publication Date:||September 1992|
|Keyword(s):||European Monetary Union, Fiscal Federalism, Regional Insurance|
|JEL(s):||F41, F42, H77|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=697|
We examine proposals to introduce in the European Community national insurance against unevenly distributed shocks. This would operate differently from tax and government spending activities that now yield regional insurance within countries, since the latter are mainly designed for other purposes such as income redistribution and general revenue-raising. According to our evidence, the appeal of such insurance is very limited because the risks are too highly correlated and there is an excessive chance that a country in difficulty would not receive aid. The costs of a continuing programme are likely to exceed the benefits.