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Differently unequal: Zooming-in on the distributional dimensions of the crisis in euro area countries

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  • Marco D’Errico
  • Corrado Macchiarelli
  • Roberta Serafini

Abstract

This paper discusses how income inequality developed during the current crisis in euro area countries, as well as the role played by each income source. Based on an extended definition of income – including additional components which do not appear in the standard Eurostat definitions – we complement the information provided by the Gini index and quantile ratios by computing an alternative inequality indicator, developed by Zenga (2007), and its decomposition by income source. While broadly confirming the distributional effect of the crisis documented in previous studies, we find that in specific countries the level of inequality appears higher when alternative measures are taken into account, and that the rise of inequality since 2008 has not been as modest as previous studies would suggest. The paper further looks at how the distribution of income has evolved during the crisis by income quantile groups (i.e. ‘zooming-in’). The results point to varying contribution of labour income in 2011 compared to 2007. In addition, while the impact of individual households’ characteristics shows a non-linear pattern across income quantile groups before the crisis, such dispersion has decreased in 2011. We argue that, on the basis of our analysis, not only euro area countries are “differently unequal” in that inequality has developed in a very peculiar way in different countries, but also that it needs to be tackled at a finer level of analysis.

Suggested Citation

  • Marco D’Errico & Corrado Macchiarelli & Roberta Serafini, 2015. "Differently unequal: Zooming-in on the distributional dimensions of the crisis in euro area countries," LEQS – LSE 'Europe in Question' Discussion Paper Series 86, European Institute, LSE.
  • Handle: RePEc:eiq:eileqs:86
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    References listed on IDEAS

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    Cited by:

    1. D’Errico, Marco & Battiston, Stefano & Peltonen, Tuomas & Scheicher, Martin, 2018. "How does risk flow in the credit default swap market?," Journal of Financial Stability, Elsevier, vol. 35(C), pages 53-74.
    2. Kosta Josifidis Author-Email: josifidis@gmail.com & Novica Supić, 2016. "Redistribution and Transmission Mechanisms of Income Inequality – Panel Analysis of the Affluent OECD Countries," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 63(2), pages 231-258, April.
    3. Donatella Baiardi & Claudio Morana, 2015. "Financial deepening and income distribution inequality in the euro area," CeRP Working Papers 153, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    4. Guerello, Chiara, 2018. "Conventional and unconventional monetary policy vs. households income distribution: An empirical analysis for the Euro Area," Journal of International Money and Finance, Elsevier, vol. 85(C), pages 187-214.
    5. Baiardi, Donatella & Morana, Claudio, 2018. "Financial development and income distribution inequality in the euro area," Economic Modelling, Elsevier, vol. 70(C), pages 40-55.
    6. Castillo-Manzano, José I. & Pedregal, Diego J. & Pozo-Barajas, Rafael, 2016. "An econometric evaluation of the management of large-scale transport infrastructure in Spain during the great recession: Lessons for infrastructure bubbles," Economic Modelling, Elsevier, vol. 53(C), pages 302-313.
    7. Chiara Assunta Ricci & Sergio Scicchitano, 2021. "Decomposing changes in income polarization by population group: what happened during the crisis?," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(1), pages 235-259, April.
    8. Simone Salotti & Carmine Trecroci, 2018. "Cross-country evidence on the distributional impact of fiscal policy," Applied Economics, Taylor & Francis Journals, vol. 50(51), pages 5521-5542, November.

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    Keywords

    inequality curve; income distribution; source decomposition; extended income definition; crisis;
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