FISCAL CONSOLIDATION PROGRAMS AND INCOME INEQUALITY

Pedro Brinca, Miguel H. Ferreira (), Francesco Franco, Hans Holter and Laurence Malafry

International Economic Review, 2021, vol. 62, issue 1, 405-460

Abstract: We document a strong empirical relationship between higher income inequality and stronger recessive impacts of fiscal consolidation episodes across time and space. To explain this finding, we develop a life‐cycle economy with uninsurable income risk. We calibrate our model to match key characteristics of several European economies, including inequality and fiscal structures, and study the effects of fiscal consolidation programs. In our model, higher income risk induces precautionary savings behavior, which decreases the proportion of credit‐constrained agents in the economy. These agents have less elastic labor supply responses to fiscal consolidations, which explain the correlation with inequality in the data.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
https://doi.org/10.1111/iere.12482

Related works:
Working Paper: Fiscal Consolidation Programs and Income Inequality (2018)
Working Paper: Fiscal Consolidation Programs and Income Inequality (2017)
Working Paper: Fiscal Consolidation Programs and Income Inequality* (2017)
Working Paper: Fiscal Consolidation Programs and Income Inequality (2017)
Working Paper: Fiscal Consolidation Programs and Income Inequality (2017)
Working Paper: Fiscal Consolidation Programs and Income Inequality (2017)
Working Paper: Fiscal consolidation programs and income inequality (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:iecrev:v:62:y:2021:i:1:p:405-460

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0020-6598

Access Statistics for this article

International Economic Review is currently edited by Michael O'Riordan and Dirk Krueger

More articles in International Economic Review from Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297. Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().