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Redistribution in the age of austerity: evidence from Europe 2006–2013

Markus Schneider (), Stephen Kinsella and Antoine Godin

Applied Economics Letters, 2017, vol. 24, issue 10, 672-676

Abstract: We examine the relationship between changes in a country’s public sector fiscal position on inequality at the top and bottom of the income distribution during the age of austerity from 2006 to 2013. We use a parametric Lorenz curve model and Gini-like indices of inequality as our measures to assess distributional changes. Based on Statistics of Income and Living Conditions (EU-SILC) and IMF data for 12 European countries, we find that more severe adjustments to the cyclically adjusted primary balance (i.e., more austerity) are associated with a more unequal distribution of income driven by rising inequality at the top. The data also weakly suggests a decrease in inequality at the bottom. The distributional impact of austerity measures reflects the reliance on regressive policies and likely produces increased incentives for rent-seeking while reducing incentives for workers to increase productivity.

Date: 2017
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DOI: 10.1080/13504851.2016.1221030

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