This study investigates the redistributive and stabilizing effects of fiscal transfers within the United States, Canada, and the European Union, focusing on the period from 2000 to 2022. Asymmetric shocks pose challenges to the stability of currency unions, potentially incentivizing regions to exit the union, while the need for social cohesion within a currency union fosters a demand for redistributive flows between regions. With monetary policy constrained within a currency union, the fiscal system could play a key role in stabilizing income in response to asymmetric shocks. 

Using a quantitative approach with panel data, the study explores long-term income redistribution and short-term stabilization. The findings reveal that Canada exhibits the highest level of redistribution, with an estimated 25 percent of income disparities reduced through taxes and transfers, followed by the United States at 16 percent. In contrast, the European Union shows minimal redistribution, with little to no significant income equalization across member states. On the contrary, there is evidence that the fiscal flows at the European level move from poorer to wealthier member states, rather than the opposite, suggesting that these flows serve purposes beyond the direct welfare of citizens.

In terms of stabilization, the results are inconclusive, although estimates were obtained. Stabilization was divided into two effects, where the delayed effect of stabilization was estimated using data that was lagged once, and the instantaneous effect, using non-lagged data. The delayed effect is estimated at 81 percent for the United States, 55 percent for Canada, and 52 percent for the EU. The instantaneous effect of stabilization is estimated at 53 percent for the US, 11 percent for Canada, and 0.4 percent for the EU. However, these estimations are subject to concerns of stationarity and autocorrelation issues in the time series. As such, no definitive conclusions on stabilization could be drawn from this study.