The stabilizing role of unemployment benefits in Poland
Journal Title: Central European Review of Economics and Finance - Year 2016, Vol 12, Issue 2
Abstract
This study examines the impact of unemployment benefit system in stabilizing the economy in Poland in 2008-13. The goal is to answer the question: by how much do the automatic stabilizers in the Polish unemployment benefit system lower the volatility of aggregate demand? The effectiveness of unemployment benefits` automatic response to demand decline is measured using short-term elasticities of employment and government expenses for unemployment benefits with respect to output and marginal propensity to consume out of temporary change in income. To evaluate if automatic stabilizers have no delayed impact on the economy the IRF function in three variable VAR model is used. The paper concludes that unemployment benefits dampened consumption volatility by approximately 0,008% GDP. Impulse responses were used to simulate the dynamic response of disposable income and individual consumption to government's unemployment benefit payouts. Small stabilizing effectiveness of unemployment compensation can be explained by law rate of unemployed entitled to receive the compensation and also by the fact that insurance benefit payouts for unemployed people accounted only for 0,8% of total government expenses.(original abstract)
Authors and Affiliations
Katarzyna Kalinowska
Keywords
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