The dynamic effects of fiscal consolidation episodes on income inequality: evidence for 17 OECD countries over 1978–2013
Philipp Heimberger ()
Empirica, 2020, vol. 47, issue 1, No 3, 53-81
Abstract Using an annual data set covering 17 OECD countries over the time period 1978–2013, this paper analyzes the dynamic effects of fiscal consolidation episodes on income inequality in the short- and medium-run. By estimating impulse response functions from local projections, we find that fiscal consolidations typically lead to an increase in income inequality. Baseline results suggest that in the aftermath of the start of a fiscal adjustment episode, the Gini coefficient of disposable income increases by about 0.4% points in the short-run (in year three), and by 0.6% points in the medium-run (in year seven). The impact of fiscal austerity measures on the income distribution is found to be more pronounced (a) when the size of the fiscal consolidation package is large rather than small; (b) when the duration of the adjustment is long instead of short; (c) when the fiscal consolidation is based more on spending cuts than on tax increases; (d) when the consolidation is started in the aftermath of a financial crisis rather than in a non-crisis episode; and (e) when the adjustment falls into a period of low economic growth instead of high growth.
Keywords: Income inequality; Income distribution; Fiscal austerity; Fiscal policy; Fiscal consolidation (search for similar items in EconPapers)
JEL-codes: D63 E62 E64 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s10663-018-9404-z Abstract (text/html)
Access to the full text of the articles in this series is restricted.
Working Paper: The dynamic effects of fiscal consolidation episodes on income inequality: Evidence for 17 OECD Countries over 1978-2013 (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:empiri:v:47:y:2020:i:1:d:10.1007_s10663-018-9404-z
Ordering information: This journal article can be ordered from
http://www.springer. ... ration/journal/10663
Access Statistics for this article
Empirica is currently edited by Fritz Breuss and Fritz Breuss
More articles in Empirica from Springer, Austrian Institute for Economic Research, Austrian Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().