The cushioning effect of fiscal policy in the EU during the COVID-19 pandemic
JRC Working Papers on Taxation and Structural Reforms No 02/2021
This paper analyses the extent to which the tax-benefit systems of the EU Member States have protected household incomes during the COVID-19 pandemic. We makes use of EUROMOD, the EU tax-benefit microsimulation model based on 2018 EU-SILC data. Detailed aggregate labour market statistics combined with a novel approach to simulate transitions from work into monetary compensation schemes (short-time work schemes, as well as compensation schemes for self-employed) and into unemployment allows us to replicate the labour market conditions during the COVID-19 crisis in 2020 in the underlying EU-SILC data. Our analysis highlights that most of the countries analysed experienced a significant drop in market incomes, with poorer households hit the hardest. However, our findings also suggest that the tax-benefit systems of the EU Member States have been able to absorb a significant share of the COVID-19 shock, offsetting – or alleviating – its regressive nature on market incomes. Monetary compensation schemes implemented by EU Member States played a key role in cushioning against the fall in household income during the crisis.
CHRISTL Michael;
DE POLI Silvia;
FIGARI Francesco;
HUFKENS Tine;
LEVENTI Chrysa;
PAPINI Andrea;
TUMINO Alberto;
Christl, M., De Poli, S., Figari, F., Hufkens, T., Leventi, C., Papini, A. and Tumino, A., The cushioning effect of fiscal policy in the EU during the COVID-19 pandemic, European Commission, 2021, JRC125567.
2021-07-22
European Commission
JRC125567
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