Changes in Income Distributions and the Role of Tax-Benefit Policy During the Great Recession: An International Perspective

38 Pages Posted: 4 Dec 2013

See all articles by Olivier Bargain

Olivier Bargain

IZA Institute of Labor Economics; University College Dublin (UCD)

Tim Callan

Economic and Social Research Institute, Ireland; IZA Institute of Labor Economics

Karina Doorley

University College Dublin (UCD)

Claire Keane

Economic and Social Research Institute, Ireland

Abstract

This paper examines the impact on inequality and poverty of the economic crisis in four European countries, namely France, Germany, the UK and Ireland, and the contribution of tax and benefit policy changes. The period examined, 2008 to 2010, was one of great economic turmoil, yet it is unclear whether changes in inequality and poverty rates over this time period were mainly driven by changes in market income distributions or by tax-benefit policy reforms. We disentangle these effects by producing counterfactual ("no reform") scenarios using tax-benefit microsimulation and representative household surveys of each country.For the period under study, we find that the policy reaction has contributed to stabilizing or even decreasing inequality and relative poverty in the UK, France and especially in Ireland, a country where rising unemployment would have otherwise increased poverty. Market income inequality has nonetheless pushed up inequality and relative poverty in France. Relative poverty and, notably, child poverty, have increased in Germany due to policy responses combined with the increasing inequality of market income.

Keywords: tax-benefit policy, inequality, poverty, decomposition, microsimulation, crisis

JEL Classification: H23, H53, I32

Suggested Citation

Bargain, Olivier and Callan, Tim and Doorley, Karina and Keane, Claire, Changes in Income Distributions and the Role of Tax-Benefit Policy During the Great Recession: An International Perspective. IZA Discussion Paper No. 7737, Available at SSRN: https://ssrn.com/abstract=2363224

Olivier Bargain (Contact Author)

IZA Institute of Labor Economics ( email )

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Germany

University College Dublin (UCD) ( email )

Belfield, Dublin 4 4
Ireland
+353 1 716 8357 (Phone)
+353 1 283 0068 (Fax)

HOME PAGE: http://www.ucd.ie/economics/staff/obargain/obargain.htm

Tim Callan

Economic and Social Research Institute, Ireland ( email )

4 Burlington Road
Dublin 4
Republic of Ireland

IZA Institute of Labor Economics ( email )

Bonn, D-53072
Germany

Karina Doorley

University College Dublin (UCD) ( email )

Belfield, Dublin 4 4
Ireland

Claire Keane

Economic and Social Research Institute, Ireland ( email )

Whitaker Square
Sir John Rogerson's Quay
Dublin 2
United States

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