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Income Inequality Developments in the Great Recession

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  • Thomas Hellebrandt

Abstract

The Great Recession has increased concerns over the fairness of the distribution of wealth and income in many societies. Using data on eight advanced economies (Germany, Greece, Ireland, Italy, Slovakia, Spain, the United Kingdom, and United States) between 2007 and 2010, I show how the Great Recession affected income inequality in different countries and how families and the state tried to mitigate its impact - though redistributing income within households and through the tax and benefit system. In most countries redistribution within household, through the social safety net and through direct taxes has been largely successful in offsetting the effect on income inequality of increased earnings inequality caused by the rise in unemployment in this pre-austerity period. I discuss some policy lessons that emerge from the varying experiences of different countries.

Suggested Citation

  • Thomas Hellebrandt, 2014. "Income Inequality Developments in the Great Recession," SOEPpapers on Multidisciplinary Panel Data Research 644, DIW Berlin, The German Socio-Economic Panel (SOEP).
  • Handle: RePEc:diw:diwsop:diw_sp644
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    References listed on IDEAS

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    1. Jaejoon Woo & Ms. Elva Bova & Mr. Tidiane Kinda & Ms. Yuanyan S Zhang, 2013. "Distributional Consequences of Fiscal Consolidation and the Role of Fiscal Policy: What Do the Data Say?," IMF Working Papers 2013/195, International Monetary Fund.
    2. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP) – Scope, Evolution and Enhancements," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(1), pages 139-169.
    3. Lerman, Robert I & Yitzhaki, Shlomo, 1985. "Income Inequality Effects by Income," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 151-156, February.
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    Cited by:

    1. Timm Bönke & Carsten Schröder, 2014. "European-Wide Inequality in Times of the Financial Crisis," Journal of Income Distribution, Ad libros publications inc., vol. 23(3), pages 7-34, November.
    2. Ilaria Petrarca & Roberto Ricciuti, 2015. "Relative income distribution in six European countries: market and disposable income," Working Papers 02/2015, University of Verona, Department of Economics.
    3. Vanda Almeida, 2020. "Income Inequality and Redistribution in the Aftermath of the 2007-2008 Crisis: The U.S. Case," National Tax Journal, National Tax Association;National Tax Journal, vol. 73(1), pages 77-114, March.
    4. Smit, Tycho A.B. & Hu, Jing & Harmsen, Robert, 2014. "Unravelling projected energy savings in 2020 of EU Member States using decomposition analyses," Energy Policy, Elsevier, vol. 74(C), pages 271-285.
    5. Mehmet E. Yaya, 2018. "Great Recession and Income Inequality: a State-level Analysis," Journal of Economics, Race, and Policy, Springer, vol. 1(2), pages 112-125, September.

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