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Accounting for Income Changes over the Great Recession (2007-2010) Relative to Previous Recessions: The Importance of Taxes and Transfers

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  • Jeff Larrimore
  • Richard V. Burkhauser
  • Philip Armour

Abstract

With data from the March CPS and using shift-share analysis, we analyze the factors that account for changes in post-tax post-transfer income during each of the past four recessions. What distinguishes the Great Recession is that drops in employment rather than wage earnings drove income declines. In addition, taxes and transfers played a much greater role in offsetting market income losses --a result largely missed in analyses that do not account for taxes and transfers. This is particularly so among the bottom quintile of the distribution where lower and increased transfers offset more than one-half of the market income declines.

Suggested Citation

  • Jeff Larrimore & Richard V. Burkhauser & Philip Armour, 2013. "Accounting for Income Changes over the Great Recession (2007-2010) Relative to Previous Recessions: The Importance of Taxes and Transfers," NBER Working Papers 19699, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:19699
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    Cited by:

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    2. Bradley Hardy & Timothy Smeeding & James P. Ziliak, 2018. "The Changing Safety Net for Low-Income Parents and Their Children: Structural or Cyclical Changes in Income Support Policy?," Demography, Springer;Population Association of America (PAA), vol. 55(1), pages 189-221, February.
    3. Tim Callan & Brian Nolan & Claire Keane & Michael Savage & John Walsh, 2014. "Crisis, response and distributional impact: the case of Ireland," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-17, December.
    4. Vanda Almeida, 2020. "Income Inequality and Redistribution in the Aftermath of the 2007-2008 Crisis: The U.S. Case," National Tax Journal, National Tax Association;National Tax Journal, vol. 73(1), pages 77-114, March.
    5. Anastasia PANORI & Yannis PSYCHARIS, 2018. "The impact of the economic crisis on poverty and welfare in Athens," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 48, pages 23-40.

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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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