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

Applied Economics Letters, 24:10 (2017)

Levy Economics Institute, Working Papers Series No. 856

19 Pages Posted: 19 Dec 2015 Last revised: 10 Mar 2017

See all articles by Markus P. A. Schneider

Markus P. A. Schneider

University of Denver

Stephen Kinsella

University of Limerick

Antoine Godin

Centre d'économie de l'Université de Paris Nord (CEPN); Agence Française de Développement (AFD); Hans-Boeckler-Stiftung - Macroeconomic Policy Institute (IMK)

Date Written: November 1, 2015

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

JEL Classification: D31, D63, E62, E65, H6

Suggested Citation

Schneider, Markus P. A. and Kinsella, Stephen and Godin, Antoine, Redistribution in the Age of Austerity: Evidence from Europe, 2006-13 (November 1, 2015). Applied Economics Letters, 24:10 (2017); Levy Economics Institute, Working Papers Series No. 856. Available at SSRN: https://ssrn.com/abstract=2705026 or http://dx.doi.org/10.2139/ssrn.2705026

Markus P. A. Schneider (Contact Author)

University of Denver ( email )

2201 S. Gaylord St
Denver, CO 80208-2685
United States
(303) 871 2146 (Phone)

HOME PAGE: http://portfolio.du.edu/MSCHNE58

Stephen Kinsella

University of Limerick ( email )

Limerick
Ireland
+35361233611 (Phone)
+35361330316 (Fax)

HOME PAGE: http://stephenkinsella.net

Antoine Godin

Centre d'économie de l'Université de Paris Nord (CEPN) ( email )

UMR7115
Université Paris-Nord
Paris XIII
France

Agence Française de Développement (AFD) ( email )

5, rue Roland Barthes
Paris Cedex 12, 75598
France

Hans-Boeckler-Stiftung - Macroeconomic Policy Institute (IMK) ( email )

Hans-Böckler-Straße 39
40476 Düsseldorf
Germany

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