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The Great Recession, Austerity and Inequality: Lessons from Ireland

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  • M. Savage
  • T. Callan
  • B. Nolan
  • B. Colgan

Abstract

The advent of the Great Recession and the widespread adoption of fiscal austerity policies have heightened concern about inequality and its effects. We examine how the distribution of income in Ireland—a country which experienced one of the most severe economic contractions—has evolved over the years 2008 to 2013. Standard cross‐sectional analysis of the income distribution shows broad stability in the Gini coefficient and in decile shares, with one main exception: the share of the bottom decile fell sharply, with the largest fall in average incomes being for that group. Longitudinal analysis shows that the falls in the average income for the bottom decile were not due to decreasing income for those remaining in the bottom decile, but to falls in income from those initially located in higher deciles. The extent of redistribution through taxes and transfers increased strongly, as measured by the Reynolds‐Smolensky index, which rose from 0.20 before the onset of the crisis to 0.27 in 2013. Analysis indicates that about three‐quarters of this increased redistribution is due to automatic stabilisers and one‐quarter to discretionary policy changes.

Suggested Citation

  • M. Savage & T. Callan & B. Nolan & B. Colgan, 2019. "The Great Recession, Austerity and Inequality: Lessons from Ireland," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 65(2), pages 312-336, June.
    • Handle: RePEc:bla:revinw:v:65:y:2019:i:2:p:312-336
    DOI: 10.1111/roiw.12337
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    Citations

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    Cited by:

    1. Yakut, Aykut Mert & de Bruin, Kelly, 2023. "The importance of having a more realistic welfare transfer determination rule: A CGE analysis for Ireland," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1310-1325.
    2. Jane Dooley & David (David Patrick) Madden, 2021. "Ireland’s Post Crisis Recovery, 2012-2019: Was It Pro-Poor?," Working Papers 202122, School of Economics, University College Dublin.
    3. Mari, Gabriele & Keizer, Renske, 2020. "Parental job loss and early child development in the Great Recession," SocArXiv 2596e, Center for Open Science.
    4. Karina Doorley & Tim Callan & Michael Savage, 2021. "What drove income inequality in EU crisis countries during the Great Recession?," Fiscal Studies, John Wiley & Sons, vol. 42(2), pages 319-343, June.
    5. Regan, Mark & Kakoulidou, Theano, 2022. "How important are the unit of analysis and equivalence scales when measuring income poverty and inequality? Evidence from Ireland," Papers WP721, Economic and Social Research Institute (ESRI).
    6. Vanesa Jorda & Jose M. Alonso, 2020. "What works to mitigate and reduce relative (and absolute) inequality?: A systematic review," WIDER Working Paper Series wp-2020-152, World Institute for Development Economic Research (UNU-WIDER).
    7. O'Donoghue, Cathal & Sologon, Denisa Maria, 2023. "The Transformation of Public Policy Analysis in Times of Crisis – A Microsimulation-Nowcasting Method Using Big Data," IZA Discussion Papers 15937, Institute of Labor Economics (IZA).

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