Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/149896
Authors: 
Klein, Mathias
Winkler, Roland
Year of Publication: 
2017
Series/Report no.: 
DIW Discussion Papers 1633
Abstract: 
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.
Subjects: 
austerity
fiscal policy
inequality
private debt
local projections
JEL: 
E62
E64
D63
Document Type: 
Working Paper

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