Interregional Stabilisation and Redistribution by the Federal Unemployment Insurance

The insurance function of federal budgets against regional asymmetric income shocksin scal federations is well known in the literature. Empirical studies provide estimates of the amount of stabilisation between the regions. Especially automatic stabilisers, like the unemployment insurance, show a large reaction to regional imbalances. The goal of this paper is to estimate the amount of redistribution and stabilisation between the regions in Germany on a small area level. Therefore we use quarterly data from the national unemployment insurance for the period 2000 to 2007 and analyse redistribution and stabilisation between 16 German states and on the disaggregated level of 96 German spatial planning units. Estimates for the stabilising e ect are provided for expenditure on active labour market policies as well as for unemployment insurance bene ts. The results indicate that unemployment insurance bene ts have a strong regional stabilising e ect, while expenditure on active labour market policies mainly provide regional redistribution. DRAFT VERSION, PLEASE DO NOT QUOTE Paper presented for the Regional Studies Association Annual International Conference 2010, Pécs, Southern Hungary, 24th 26th May For additional information please contact: [email protected]