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The distributional effects of fiscal consolidation in nine EU countries

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  • Avram, Silvia
  • Figari, Francesco
  • Leventi, Chrysa
  • Levy, Horacio
  • Navicke, Jekaterina
  • Matsaganis, Manos
  • Militaru, Eva
  • Paulus, Alari
  • Rastrigina, Olga
  • Sutherland, Holly

Abstract

We compare the distributional effects of policy changes presented as fiscal consolidation measures in nine EU countries that experienced large budget deficits following the financial crisis of the late 2000s and subsequent economic downturn, using the EU microsimulation model EUROMOD. The nine countries, Estonia, Greece, Spain, Italy, Latvia, Lithuania, Portugal, Romania and the UK, chose different policy mixes to achieve varying degrees of fiscal consolidation. We find that the burden of fiscal consolidation brought about through the first round effects of increases in personal taxes, cuts in spending on cash benefits and reductions in public sector pay is shared differently across the income distribution in the nine countries. In Greece, Spain, Italy, Latvia, Romania and the UK the better off lose a higher proportion of their incomes than the poor. At the other extreme, in Estonia, the poor lose a higher proportion than the rich. In Lithuania and Portugal the burden of fiscal consolidation falls more heavily on the poor and the rich than it does on those with middle incomes. Including increases in VAT alters the comparative picture by making the policy packages appear more regressive, to varying extents.

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Bibliographic Info

Paper provided by EUROMOD at the Institute for Social and Economic Research in its series EUROMOD Working Papers with number EM2/13.

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Date of creation: 11 Feb 2013
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Publication status: published
Handle: RePEc:ese:emodwp:em2-13

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Cited by:
  1. John Hills & Alari Paulus & Holly Sutherland & Iva Tasseva, 2014. "A lost decade? Decomposing the effect of 2001-11 tax-benefit policy changes on the income distribution in EU countries," ImPRovE Working Papers, Herman Deleeck Centre for Social Policy, University of Antwerp 14/03, Herman Deleeck Centre for Social Policy, University of Antwerp.
  2. Sebastian Leitner, 2013. "Analysis of Short and Medium Term Crisis Effects on Welfare and Poverty in SEE: Stress Testing Bulgarian and Romanian Households," wiiw Balkan Observatory Working Papers, The Vienna Institute for International Economic Studies, wiiw 111, The Vienna Institute for International Economic Studies, wiiw.
  3. Panos Tsakloglou & Francesco Figari & Alari Paulus & Holly Sutherland & Gerlinde Verbist & Francesca Zantomio, 2014. "Taxing home ownership: distributional effects of including net imputed rent in taxable income," EcoMod2014, EcoMod 7474, EcoMod.
  4. repec:ese:emodwp:em5-13 is not listed on IDEAS
  5. repec:ese:emodwp:em8-13 is not listed on IDEAS
  6. repec:ese:emodwp:em4-13 is not listed on IDEAS
  7. Lidia Ceriani & Carlo V. Fiorio & Chiara Gigliarano, 2013. "The importance of choosing the data set for tax-benefit analysis," International Journal of Microsimulation, Interational Microsimulation Association, Interational Microsimulation Association, vol. 1(6), pages 86-121.
  8. Vassiliki Koutsogeorgopoulou & Manos Matsaganis & Chrysa Leventi & Jan-David Schneider, 2014. "Fairly Sharing the Social Impact of the Crisis in Greece," OECD Economics Department Working Papers, OECD Publishing 1106, OECD Publishing.
  9. repec:ese:emodwp:em15-13 is not listed on IDEAS
  10. Jean Pisani-Ferry & André Sapir & Guntram B. Wolff, . "EU-IMF assistance to euro area countries: an early assessment," Blueprints, Bruegel, Bruegel, number 779, December.
  11. Massimo Baldini, 2014. "Fiscal austerity and income distribution in Italy," Center for the Analysis of Public Policies (CAPP), Universita di Modena e Reggio Emilia, Dipartimento di Economia Politica 0112, Universita di Modena e Reggio Emilia, Dipartimento di Economia Politica.
  12. H. Xavier Jara & Alberto Tumino, 2013. "Tax-benefit systems, income distribution and work incentives in the European Union," International Journal of Microsimulation, Interational Microsimulation Association, Interational Microsimulation Association, vol. 1(6), pages 27-62.
  13. Holly Sutherland & Francesco Figari, 2013. "EUROMOD: the European Union tax-benefit microsimulation model," International Journal of Microsimulation, Interational Microsimulation Association, Interational Microsimulation Association, vol. 1(6), pages 4-26.
  14. repec:ese:emodwp:em7-13 is not listed on IDEAS

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