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Reducing or aggravating inequality? : Preliminary findings from the 2008 financial crisis

  • Fiorio, Carlo V
  • Saget, Catherine

This paper looks at possible transmission channels through which the 2008 crisis might affect the earnings distribution (changes in employment composition, changes in hours of work and changes in pay structure). In addition to the earnings channel, the crisis may also affect the income distribution through changes in income from capital and social transfers. The paper briefly reviews the literature and shows that in most cases income inequality decreases following financial crises, although scant evidence is found concerning earnings inequality. Using earnings data on two countries hit particularly early by the crisis (the United Kingdom and the United States) shows the current crisis had led to a very small increase in earnings inequality in the short term. However, preliminary results support the view that the crisis has also led to an increase in income inequality, both because low wage earners have been more likely to lose their jobs and because social transfers are in general lower than the earnings received earlier.

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File URL: http://www.ilo.org/public/libdoc/ilo/2010/110B09_67_engl.pdf
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Paper provided by International Labour Organization in its series ILO Working Papers with number 456487.

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Date of creation: 2010
Date of revision:
Publication status: Published in Working paper series, Policy Integration Dept.
Handle: RePEc:ilo:ilowps:456487
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  1. Erosa, Andres & Ventura, Gustavo, 2002. "On inflation as a regressive consumption tax," Journal of Monetary Economics, Elsevier, vol. 49(4), pages 761-795, May.
  2. Stanley Fischer & Franco Modigliani, 1978. "Towards an understanding of the real effects and costs of inflation," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 114(4), pages 810-833, December.
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  4. Thomas Piketty & Emmanuel Saez, 2006. "The Evolution of Top Incomes: A Historical and International Perspective," American Economic Review, American Economic Association, vol. 96(2), pages 200-205, May.
  5. Michael Lokshin & Martin Ravallion, 2000. "Welfare Impacts of the 1998 Financial Crisis in Russia and the Response of the Public Safety Net," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(2), pages 269-295, July.
  6. Albanesi, Stefania, 2002. "Inflation and Inequality," CEPR Discussion Papers 3470, C.E.P.R. Discussion Papers.
  7. FA Al-Marhubi, 2000. "Income inequality and inflation: the cross-country evidence," Contemporary Economic Policy, Western Economic Association International, vol. 18(4), pages 428-439, October.
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  11. repec:ilo:ilowps:433612 is not listed on IDEAS
  12. Mah, Jai S., 2006. "Economic restructuring in post-crisis Korea," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(4), pages 682-690, August.
  13. De Hoyos, Rafael E., 2007. "Accounting for Mexican income inequality during the 1990s," Policy Research Working Paper Series 4224, The World Bank.
  14. James Crotty & Kang-Kook Lee, 2005. "From East Asian “Miracle” to Neo-liberal “Mediocrity”: The Effects of Liberalization and Financial Opening on the Post-crisis Korean Economy," Global Economic Review, Taylor & Francis Journals, vol. 34(4), pages 415-434.
  15. Stephen P. Jenkins, 2009. "Distributionally-Sensitive Inequality Indices And The Gb2 Income Distribution," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(2), pages 392-398, 06.
  16. Leigh, Andrew & van der Eng, Pierre, 2009. "Inequality in Indonesia: What can we learn from top incomes?," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 209-212, February.
  17. Ragayah Haji Mat Zin, 2005. "Income Distribution in East Asian Developing Countries: recent trends," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 19, pages 36-54, November.
  18. Rychly, Ludek, 2009. "Social dialogue in times of crisis : finding better solutions," ILO Working Papers 432977, International Labour Organization.
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