Department of Economic Policy Working Paper Series 15
The aim of this paper is to provide the first empirical evidence ofthe impact of fiscal consolidation on income inequality in V4 countries.Although the literature on income inequality and its various determinantsis wide, there are still some areas in this topic, where the research islacking.Different specifications of models imply that fiscal consolidation in V4countries leads to an increase in income inequality. Results of our analy-sis suggest, that fiscal consolidation larger than 2 % of GDP has negativeimpact on equality in V4 countries, while this effect is stronger than theeffects of our control variables – GDP growth, change in total factor pro-ductivity (TFP), change in trade openness, mean years of schooling andunemployment. Change in structural balance seems to have no effect onincome inequality in the given countries. However, structural balance havesurprisingly negative effect. We believe it is due to the structure of ourdata set, which contains only three observations with positive structuralbalance.
income inequality fiscal consolidation V4 countries