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

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  • Markus P. A. Schneider
  • Stephen Kinsella
  • Antoine Godin

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.

Suggested Citation

  • Markus P. A. Schneider & Stephen Kinsella & Antoine Godin, 2017. "Redistribution in the age of austerity: evidence from Europe 2006–2013," Applied Economics Letters, Taylor & Francis Journals, vol. 24(10), pages 672-676, June.
    • Handle: RePEc:taf:apeclt:v:24:y:2017:i:10:p:672-676
    DOI: 10.1080/13504851.2016.1221030
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    Cited by:

    1. Philipp Heimberger, 2020. "The dynamic effects of fiscal consolidation episodes on income inequality: evidence for 17 OECD countries over 1978–2013," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 47(1), pages 53-81, February.
    2. Vanesa Jorda & Jose M. Alonso, 2020. "What works to mitigate and reduce relative (and absolute) inequality?: A systematic review," WIDER Working Paper Series wp-2020-152, World Institute for Development Economic Research (UNU-WIDER).

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