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Austerity, Inequality, and Private Debt Overhang

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  • Klein, Mathias
  • Winkler, Roland

Abstract

We show that the distributional consequences of fiscal consolidations depend significantly on the level of private indebtedness. Austerity leads to a strong and persistent increase in income inequality when private debt is high. In contrast, there are no discernible distributional effects when private debt is low. This result is robust to alternative identifications of consolidations, to different ways of defining high and low debt states, and to controlling for the state of the business cycle.

Suggested Citation

  • Klein, Mathias & Winkler, Roland, 2017. "Austerity, Inequality, and Private Debt Overhang," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168076, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc17:168076
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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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