Inequality, Redistribution, and the Financial Crisis: Evidence from Distributional National Accounts for Austria

Abstract

In this paper, we provide novel findings regarding the distributional effects of the global financial and economic crisis and how redistribution operated during this time, using detailed data for Austria. We construct distributional national accounts for the period 2004–2016 by combining survey data, tabulated tax data, and detailed national accounts data. The comprehensive data set allows us to analyze the distribution of macroeconomic income growth across the income distribution and to explore the evolution of income inequality over time. Our results suggest that as the distribution of growth changed over time, this had considerable repercussions for inequality, which started to decline at the very beginning of the economic and financial crisis, but increased again after 2012. We find that capital income largely determined both the level and the dynamics of income inequality. Government spending was found to play a key role for redistributive effects across the income distribution. In particular, in-kind transfers redistributed pre-tax income to a large extent. Our results show further that individuals with lower educational levels and younger individuals faced negative growth in pre-tax income over the years and also benefited considerably from redistribution.