The Distributional Effects of Austerity Measures: A Comparison of Six EU Countries

Abstract

We compare the distributional effects of austerity measures that have been introduced in 6 EU countries in the period of large gorvernment budget deficits following the 2007-8 financial crisis and subsequent economic downturn. We explore the effects of policy changes presented as "austerity measures" in Estonia, Ireland, Greece, Spain, Portugal and the UK, using the EU microsimulation model EUROMOD and the Irish national model, SWITCH.

Using a set of common assumptions we find that the burden of fiscal consolidation brought about through changes in components of houselhold disposable income is shared differently across the income distribution in the six countries. At one extreme, in Greece, the better off lose a higher proportion of their incomes than the poor and at the other, in Portugal, the poor lose a higher proportion than the rich.