Redistribution in the Age of Austerity: Evidence from Europe, 2006-13

Markus Schneider (), Stephen Kinsella and Antoine Godin

Economics Working Paper Archive from Levy Economics Institute

Abstract: We examine the relationship between changes in a country's public sector fiscal position and inequality at the top and bottom of the income distribution during the age of austerity (2006-13). We use a parametric Lorenz curve model and Gini-like indices of inequality as our measures to assess distributional changes. Based on the EU's Statistics on Income and Living Conditions SLIC and International Monetary Fund 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 suggest 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.

Keywords: Inequality; Austerity; Europe; Fiscal Policy; Lorenz Curve (search for similar items in EconPapers)
JEL-codes: D31 D63 E62 E65 H6 (search for similar items in EconPapers)
Date: 2015-12
New Economics Papers: this item is included in nep-eec, nep-mac, nep-pbe and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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