Automatic Stabilizers, Economic Crisis and Income Distribution in Europe

Mathias Dolls, Clemens Fuest and Andreas Peichl

No 4917, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper investigates to what extent the tax and transfer systems in Europe protect households at different income levels against losses in current income caused by economic downturns like the present financial crisis. We use a multi country micro simulation model to analyse how shocks on market income and employment are mitigated by taxes and transfers. We find that the aggregate redistributive effect of the tax and transfer systems increases in response to the shocks. But the extent to which households are protected differs across income levels and countries. In particular, there is little stabilization of disposable income for low income groups in Eastern and Southern European countries.

Keywords: crisis; inequality; automatic stabilization; redistribution (search for similar items in EconPapers)
JEL-codes: E32 E63 H2 H31 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2010-04
New Economics Papers: this item is included in nep-cmp, nep-eec and nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Published - published in: Research in Labor Economics, 2011, 32, 227-256

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Chapter: Automatic Stabilizers, Economic Crisis and Income Distribution in Europe (2011)
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