GINI DP 70: Inequality and Poverty in Boom and Bust: Ireland as a Case Study

Introduction Ireland, a small country of only 4 million people, none the less represents a particularly interesting case study on the distributional impact of pronounced macroeconomic fluctuations. In the first instance this is because Ireland has seen quite remarkable macroeconomic fluctuations over the past two decades, with the fastest economic growth rates in the OECD during the so-called ‘Celtic Tiger’ boom followed by the post-crisis recession which had a more negative impact on national output in Ireland than in any other OECD country. The decade of exceptionally rapid growth from the mid-1990s saw the numbers employed expand dramatically and unemployment reduced to 4%, but included an unsustainable credit-fuelled expansion in the construction sector and unbridled property price boom. Recession from 2008 onwards went together with a bursting of the property bubble, a collapse in asset values, a banking crisis of unprecedented proportions, and a ballooning fiscal deficit. This toxic combination meant that by late 2010, despite substantial increases in taxation and expenditure cuts, the Irish government had to avail of a ‘bail-out’ by the EU and IMF. The scale of the boom and subsequent recession, accompanied by sustained expansion and then retrenchment in public spending and sharp swings in taxation, mark Ireland out as an outlier in terms of macroeconomic fluctuations, and likely to be particularly illuminating as a case study on their impact on the distribution of income and on poverty. ...