Austerity, inequality and private debt overhang

Arbeitspapier

Using panel data of 17 OECD countries for 1980-2011, we find that the distributional consequences of fiscal consolidations depend significantly on the level of private indebtedness. Austerity leads to a strong and persistent increase in income inequality during periods of private debt overhang. In contrast, there are no discernible distributional effects when private debt is low. This result is robust to alternative identifications of fiscal consolidations, to different ways of defining periods of private debt overhang, and to controlling for the state of the business cycle. We explore different channels through which our findings can be rationalized.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Discussion Papers ; No. 1633

Classification and Topics

• Classification: Wirtschaft ; Fiscal Policy ; Incomes Policy; Price Policy ; Equity, Justice, Inequality, and Other Normative Criteria and Measurement
• Subject: austerity ; fiscal policy ; inequality ; private debt ; local projections

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Klein, Mathias ; Winkler, Roland
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/149896
• Last update: 10.03.2025, 11:42 AM CET