Quantifying the Effects of Recent Economic and Fiscal Crises on Income Inequality in Greece

Income inequality and the effectiveness of policies aiming at its reduction are arguably indicators of a country’s level of economic and social development. In the case of Greece, the lasting economic turmoil and the extensive fiscal interventions facing the nation over the last two decades make it an interesting case to study both the causes of income inequality and the impact of selected policy interventions on income distribution. Three are the main objectives of this paper. First, to identify the main economic and political determinants of income distribution in Greece during the period 1995–2020. Second, to investigate whether the period during which the country was subjected to the Excessive Deficit Procedure of the Stability and Growth Pact, namely the years 2004–2007 and 2009–2017, has significantly affected income distribution in Greece and in which direction. Third, to examine how the period 2011–2016 which we identify as the recent great Greek economic slump, during which very high unemployment rates were associated with negative economic growth rates, has altered income distribution. According to our analysis, the most significant economic factors that affect income distribution in Greece are the share of wages and salaries to GDP, the level of total real GDP, and the rate of unemployment. The subjection of the country to the Excessive Deficit Procedure as well as the period of the great Greek economic slump, exerted a negative impact on income equality, while the years of general elections, as a political determinant of income inequality, seem to improve income equality in the short run.