AUTOMATIC SOCIAL STABILIZERS WHAT THEY ARE AND HOW THEY FUNCTION

Abstract

At the global level and especially in Europe, current economic and financial crisis has had a major impact on the economy, on the output and especially on the employment and incomes. As it is known in economy, as a natural process, some elements (e.g. progressive tax system) can help to counter or to mitigate the adverse evolution of the business cycle and the output fluctuation. Normally, in the recession, the collection of taxes decreases in order to support the private income and the aggregate demand and the unemployment compensation is increased. The fast response of the automatic stabilizers is mostly due to the fact that do not require any modification of the laws and any state discretionary action in order to obtain the necessary results, being usually unnoticed by the general public. Considering that social policy can provide important tools to counter the cyclical development of the economy, this article analyses the social security benefits in report to the GDP evolution, in Europe and in Romania and proposes some solutions for the improvement of the stabilization effect of those instruments