BUDGET PERSPECTIVES 2018, PAPER 2. INCOME DISTRIBUTION IN IRELAND: THROUGH RECESSION, TOWARDS RECOVERY. June 2017

Callan, Tim and Regan, Mark and Savage, Michael and Walsh, John R. (2017) BUDGET PERSPECTIVES 2018, PAPER 2. INCOME DISTRIBUTION IN IRELAND: THROUGH RECESSION, TOWARDS RECOVERY. June 2017. [Policy Paper]

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Abstract

This paper provides an overview of how Ireland’s income distribution evolved over the Great Recession and the early years of the recovery. Three distinct perspectives are used to give a rounded view. First, the standard approach in the literature on income distribution, focusing on ‘snapshots’ of the income distribution at the beginning and end of the recession. These results suggest that the Gini coefficient was increased slightly between 2008 and 2013, but fell back to the 2008 level by 2015. During the crisis (2008-2013) income fell by more than average at the bottom of the distribution and less than average for the top income deciles. Second, detailed investigation of how household incomes changed from year to year finds that the sharp falls for the bottom income decile during this period arose mainly from falls in income for those who were initially in a higher income decile but experienced substantial losses in income. Third we find that the automatic stabilisation impact of Ireland’s tax-transfer system at the start of the recession played a strong role in limiting the increase in inequality over the period. Discretionary policy changes in direct tax and welfare played a supporting role in this regard.

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