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Begin New Search Topic Inequality Political Geography Europe Content Type Working Paper Publishing Institution Bruegel Publication Year within 10 Years Publication Year within 5 Years Publication Year within 25 Years

1. The unequal inequality impact of the COVID-19 pandemic

Author:
Zsolt Darvas
Publication Date:
03-2021
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
GDP contractions are typically associated with within-country income inequality increases. While official income inequality data for 2020 will not be available for about two years, the already available employment data for 2020 shows that the difference between highly-educated and low-educated people in terms of job losses is correlated with the economic shock from the COVID-19 pandemic, suggesting that the depth of the economic recession is related to the increase in within-country income inequality in 2020. Scenarios based on historical patterns of recessions and within-country income inequality increases suggest relatively small increases in global income inequality in 2020. Factors mitigating global inequality increases in 2020 include larger GDP per-capita declines in richer advanced countries than in poorer emerging and developing countries, and the positive GDP growth of China, which suggests that within-country inequality in the world’s most populous country might have not changed much in 2020. In contrast, it is quite likely there was a significant increase in European Union income inequality in 2020, partly reversing the decline during the previous decades.
Topic:
Poverty, European Union, Employment, Inequality, and COVID-19
Political Geography:
Europe

2. The Economic growth and income distribution implications of public spending and tax decisions

Author:
Zsolt Darvas
Publication Date:
10-2020
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
The level and composition of public expenditures and revenues both have implications for economic development, as shown by the ‘fiscal multiplier’ and the ‘quality of public finance’ literature. Public finance decisions also influence the distribution of income. Based on a review of the literature, I argue for a fair distribution of income as reflected in low-income inequality, not particularly because of the impact of income inequality on long-term growth (which is a controversial issue), but primarily because income inequality typically implies inequality of opportunity. European Union countries have very diverse public finance structures and different levels of effectiveness and there is room for improvement in the growth and equality impacts in all countries. A general guideline would be that the most effective approach comprises progressive taxes and inheritance taxes, spending on education, health and public infrastructure, and better government effectiveness. At the height of the 2008 global crisis and the subsequent European financial and economic crises, the fiscal consolidation strategies of EU countries largely relied on cutting public investment and social spending (except pensions), which is the opposite of what is suggested in the literature. Better fiscal rules and good fiscal institutions are needed to safeguard growth- and distribution-friendly expenditures in a crisis.
Topic:
Governance, European Union, Inequality, Income Inequality, Tax Systems, Macroeconomics, Economic Development, and Public Spending
Political Geography:
Europe