Redistribution in the Age of Austerity: Evidence from Europe 2006-2014
Inequality, Austerity, Europe, Fiscal policy, Lorenz curve
College of Arts Humanities and Social Sciences, Economics
We examine the relationship between changes in a country’s public sector fiscal position on inequality at the top and bottom of the income distribution during the age of austerity from 2006 to 2013. We use a parametric Lorenz curve model and Gini-like indices of inequality as our measures to assess distributional changes. Based on Statistics of Income and Living Conditions (EU-SILC) and IMF data for 12 European countries, we find that more severe adjustments to the cyclically adjusted primary balance (i.e., more austerity) are associated with a more unequal distribution of income driven by rising inequality at the top. The data also weakly suggests a decrease in inequality at the bottom. The distributional impact of austerity measures reflects the reliance on regressive policies and likely produces increased incentives for rent-seeking while reducing incentives for workers to increase productivity.
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Schneider, Markus P. A, et al. “Redistribution in the Age of Austerity: Evidence from Europe 2006-2013.” Applied Economics Letters, vol. 24, no. 10, 2017, pp. 672–676. doi: 10.1080/13504851.2016.1221030.