A cross-country decomposition of inequality during the great recession (original) (raw)
Income Inequality in the Great Recession from an EU-wide Perspective
Despite the implicit assumption stemming from many EU policy documents that European economic integration should lead to some degree of convergence between countries, studies adopting an EU-wide approach to mapping trends in income disparities remain surprisingly sparse. These are, however, especially necessary when the process of European integration has first been accelerated by the adoption of the euro and EU enlargement towards the East and then dramatically put to the test by the uneven impact of the Great Recession across Europe. This research shows EU-wide income inequality declined notably prior to 2008, driven by a strong process of income convergence between European countries. The Great Recession broke this trend. After 2008, income convergence has been sluggish, while inequality within many countries has increased significantly. Nevertheless, income convergence between European countries is restarting again in most recent years.
Fiscal Studies, 2017
Changes in Income Distributions and the Role of Tax-Benefit Policy During the Great Recession: An International Perspective * This paper examines the impact on inequality and poverty of the economic crisis in four European countries, namely France, Germany, the UK and Ireland, and the contribution of tax and benefit policy changes. The period examined, 2008 to 2010, was one of great economic turmoil, yet it is unclear whether changes in inequality and poverty rates over this time period were mainly driven by changes in market income distributions or by tax-benefit policy reforms. We disentangle these effects by producing counterfactual ("no reform") scenarios using tax-benefit microsimulation and representative household surveys of each country. For the period under study, we find that the policy reaction has contributed to stabilizing or even decreasing inequality and relative poverty in the UK, France and especially in Ireland, a country where rising unemployment would have otherwise increased poverty. Market income inequality has nonetheless pushed up inequality and relative poverty in France. Relative poverty and, notably, child poverty, have increased in Germany due to policy responses combined with the increasing inequality of market income.
Income inequalities and employment patterns in Europe before and after the Great Recession
This report addresses growing concerns about income inequalities in academic and policy debates by offering a comprehensive study of income inequalities during the years of the Great Recession starting in 2008–2009 (income data relating to 2004–2013). It has the twofold objective of adopting an EU-wide perspective and providing an updated picture of inequalities across different sources of income and in most Member States. The results show that EU-wide income inequality declined notably prior to 2008, driven by a strong process of income convergence between European countries – but the Great Recession broke this trend and pushed inequalities upwards both for the EU as a whole and across most countries. While previous studies have pointed to widening wage differentials as the main driver behind the long-term trend towards growing household disposable income inequalities across many European countries, this report identifies unemployment and its associated decline in labour income as the main reason behind the inequality surges occurring in recent years. Real income levels have declined and the middle classes have been squeezed from the onset of the crisis across most European countries. The role played by the family pooling of income in reducing inequalities and the impact of European welfare policies in cushioning the effect of economic turbulences on the distribution of income are also explored.
Using the EU-SILC to Model the Impact of the Economic Crisis on Inequality
2013
In this paper we attempted to chart the impact of the early part of Ireland's economic crisis from 2008-2010 on the distribution of income. In order to decompose the impact of components of income, we utilised a microsimulation methodology the EU-SILC User Database. In order to do this we had to develop a simulation based methodology to disaggregate the main 6 benefit variables in the EU-SILC into 17 used in our tax-benefit model. Validating, our results were positive, giving us confidence in our methodology.
Earnings and income inequality in the EU during the crisis
International Labour Review, 2012
The author examines the impact of the economic crisis on employment, earnings, inequality and poverty in the EU, focusing on Denmark, Germany, Slovakia, Spain and the United Kingdom during the period 2008-10. After reviewing the literature, he analyses recent trends, finding that during this stage of the crisis real wages reacted countercyclically in most countries, thus diverging from the pattern observed in previous recessions. He finds considerable cross-national variation in the severity and direction of changes in terms of inequality and poverty rates. However, he argues that inequality may widen because of the potential regressive effects of the announced austerity programmes.
Employment and poverty dynamics in the EU countries before, during and after the crisis
The paper aims to contribute to a better understanding of how employment change relates to changes in poverty in the European Union’s Member States by looking at both micro and macro level correlations. EU-LFS and EU-SILC data are used to analyse trends between 2005 and 2012, to reflect also on the societal effects of the financial and economic crisis. Time series for this period show that the crisis has resulted in very different employment trajectories. Larger volatility in employment was accompanied by a relatively sizeable change in poverty rates as well. According to our preferred regression model estimates, poverty to employment elasticity has been around 25 percent on average in the EU in the period between 2005 and 2012. The decomposition of poverty changes shows that countries differ greatly in the portion of total poverty changes attributed to changes in the poverty rates of both individuals living in jobless and non-jobless households, as well as in the portion of total p...
Child Poverty and Material Deprivation in the European Union during the Great Recession
The 2008 financial crisis triggered the first contraction of the world economy in the post-war era. This paper investigates the effect of the economic crisis on child poverty and material deprivation across the EU-28 plus Iceland, Norway and Switzerland. First, it examines if children were affected by the crisis to a greater extent than the population as a whole. Second, it analyses inequities among households with children and the degree to which those in workless households, migrant households, lone parent families and large families were at a greater risk of poverty and deprivation. Finally, it studies the extent to which social safety nets may have softened the negative impact of the economic crisis.
Economic Modelling, 2015
This paper discusses how income inequality developed during the current crisis in euro area countries, as well as the role played by each income source. Based on an extended definition of income-including additional components which do not appear in the standard Eurostat definitions-we complement the information provided by the Gini index and quantile ratios by computing an alternative inequality indicator, developed by Zenga (2007), and its decomposition by income source. While broadly confirming the distributional effect of the crisis documented in previous studies, we find that in specific countries the level of inequality appears higher when alternative measures are taken into account, and that the rise of inequality since 2008 has not been as modest as previous studies would suggest. The paper further looks at how the distribution of income has evolved during the crisis by income quantile groups (i.e. 'zooming-in'). The results point to varying contribution of labour income in 2011 compared to 2007. In addition, while the impact of individual households' characteristics shows a non-linear pattern across income quantile groups before the crisis, such dispersion has decreased in 2011. We argue that, on the basis of our analysis, not only euro area countries are "differently unequal" in that inequality has developed in a very peculiar way in different countries, but also because it needs to be tackled at a finer level of analysis.