Reducing or aggravating inequality? : Preliminary findings from the 2008 financial crisis
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.
|Date of creation:||2010|
|Date of revision:|
|Publication status:||Published in Working paper series, Policy Integration Dept.|
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