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Austerity and the income distribution: the case of Cyprus

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  • Koutsampelas, Christos
  • Polycarpou, Alexandros

Abstract

The economic crisis affecting Cyprus is likely to have considerable impact on the income distribution. Our analysis provides an early assessment of the short-run distributional effects of austerity measures. We distinguish between fiscal measures that affect wages, taxes and contribution rates and measures that directly affect the function of the welfare system. Using the tax-benefit EUROMOD model we attempt to quantify the distributional implications of both. The analysis focuses on the policy changes introduced over the period between 2011 and 2012, i.e. before the expected bailout deal between the government of Cyprus and the consortium of international lenders which is expected in spring 2013. Specifically, we simulate the ceteris paribus impact of the reforms on inequality and poverty as well as estimate how the burden of austerity has been shared across income groups.

Suggested Citation

  • Koutsampelas, Christos & Polycarpou, Alexandros, 2013. "Austerity and the income distribution: the case of Cyprus," EUROMOD Working Papers EM4/13, EUROMOD at the Institute for Social and Economic Research.
    • Handle: RePEc:ese:emodwp:em4-13
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    1. François Bourguignon & Amedeo Spadaro, 2006. "Microsimulation as a tool for evaluating redistribution policies," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 4(1), pages 77-106, April.
    2. Leventi, Chrysa & Figari, Francesco & Paulus, Alari & Avram, Silvia & Matsaganis, Manos & Navicke, Jekaterina & Rastrigina, Olga & Sutherland, Holly & Militaru, Eva & Levy, Horacio, 2013. "The distributional effects of fiscal consolidation in nine EU countries," EUROMOD Working Papers EM2/13, EUROMOD at the Institute for Social and Economic Research.
    3. Leventi, Chrysa & Paulus, Alari & Matsaganis, Manos & Sutherland, Holly & Callan, Tim & Levy, Horacio, 2011. "The distributional effects of austerity measures: a comparison of six EU countries," EUROMOD Working Papers EM6/11, EUROMOD at the Institute for Social and Economic Research.
    4. A. B. Atkinson, 2003. "Income Inequality in OECD Countries: Data and Explanations," CESifo Economic Studies, CESifo, vol. 49(4), pages 479-513.
    5. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
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    Cited by:

    1. Manos Matsaganis & Chrysa Leventi, 2014. "Distributive Effects of the Crisis and Austerity in Seven EU Countries," ImPRovE Working Papers 14/04, Herman Deleeck Centre for Social Policy, University of Antwerp.
    2. Koutsampelas, Christos, 2014. "The introduction of a GMI scheme in Cyprus: family structure, equivalence scales and policy challenges," EUROMOD Working Papers EM10/14, EUROMOD at the Institute for Social and Economic Research.

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