Abstract
Income inequality and the effectiveness of policies aiming at its reduction are arguably indicators of a country’s level of economic and social development. In the case of Greece, the lasting economic turmoil and the extensive fiscal interventions facing the nation over the last two decades make it an interesting case to study both the causes of income inequality and the impact of selected policy interventions on income distribution. Three are the main objectives of this paper. First, to identify the main economic and political determinants of income distribution in Greece during the period 1995–2020. Second, to investigate whether the period during which the country was subjected to the Excessive Deficit Procedure of the Stability and Growth Pact, namely the years 2004–2007 and 2009–2017, has significantly affected income distribution in Greece and in which direction. Third, to examine how the period 2011–2016 which we identify as the recent great Greek economic slump, during which very high unemployment rates were associated with negative economic growth rates, has altered income distribution. According to our analysis, the most significant economic factors that affect income distribution in Greece are the share of wages and salaries to GDP, the level of total real GDP, and the rate of unemployment. The subjection of the country to the Excessive Deficit Procedure as well as the period of the great Greek economic slump, exerted a negative impact on income equality, while the years of general elections, as a political determinant of income inequality, seem to improve income equality in the short run.
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Notes
- 1.
- 2.
See Melidis and Tzagkarakis (2021), Andriopoulou et al. (2017), Kaplanoglou and Rapanos (2018), Matsaganis and Leventi (2014), Mitrakos (2014), Koutsampelas and Tsakloglou (2013), Mitrakos and Tsakloglou (2012), Tsakloglou and Mitrakos (2006), Tsakloglou and Panopoulou (1998), Tsakloglou (1993), and Tsakloglou (1990).
- 3.
- 4.
See Eurostat, Gini coefficient of equivalised disposable income, EU-Silc survey (online data code: ILC_DI12, update March 25, 2022. At the time of writing this paper there was no data for Italy regarding the year 2020 and the corresponding data for 2019 were used.
- 5.
In chain linked volumes (2010).
- 6.
For an analysis of the issue of income distribution as a principal problem of political economy, see Sandmo (2015).
- 7.
- 8.
Vavoura and Vavouras (2022).
- 9.
Some research studies conclude that income inequality exerts positive influence on aggregate economic activity and growth while some others find a negative impact of inequality on economic activity and growth. For an analysis of the issue and an overview of some of the most relevant studies, see, among others, in Bubbico and Freytag (2018). We must also note that recent empirical research referring to the OECD countries supports the view that an increase in real GDP per capita leads to an increase in income inequality (Hailemariam et al., 2021).
- 10.
In the study of Jianu et al. (2021), Greece is included in the developing EU member states.
- 11.
- 12.
Eurostat, GDP and main components (nama_10_gdp), update May 25, 22.
- 13.
Sever and Emekcan (2021) using panel data from 55 countries during the period 1986–2017 find that inequality is reduced in election years.
- 14.
Amate-Fortes et al. (2017) using panel data for the EU countries during the period 1996–2011 find that the economic crisis has not necessarily caused a worsening of inequality.
- 15.
For an analysis of the methodological guidelines and description of EU-SILC target variables, see European Commission (2019).
- 16.
Of course, there are some individual estimates regarding the distribution of income in Greece. These unemployment rate estimates, in addition to being private and not widely acceptable, are also incompatible with the EU-SILC methodology.
- 17.
Greece was subjected to the EDP from May 19, 2004 to June 5, 2007 and from February 18, 2009 to September 19, 2017. See, European Commission, Stability and Growth Pact, the Corrective arm/Excessive Deficit Procedure, Closed Excessive Deficit Procedures, Greece. It is pointed out that the policy mix implemented during the two periods was different. The policy mix implemented during the 2009–2017 period had a much stronger (an internal devaluation policy) and longer-lasting impact.
- 18.
- 19.
According to the income approach of GDP, GDP is given by the sum of compensation of employees (the sum of wages and salaries and employer’s social contributions), plus gross operating surplus and mixed income, plus taxes less subsidies on production and imports. For example, the fact that the share of wages and salaries in GDP falls it does not imply that the share of gross operating surplus and mixed income increases. It could decrease as well. The associated share of taxes less subsidies on production and imports could increase. That was the case of Greece during the period of the great economic slump 2011–2016. The share of wages and salaries was slightly reduced from 28.3% to 28.0% of GDP. At the same time the share of operating surplus and mixed income was reduced from 51.7% to 48.9% of GDP, while the share of taxes less subsidies on production and imports had increased from 11.7% to 15.0% of GDP. See Eurostat, online data code: NAMA_10_GDP.
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Appendices
Appendix A: ANOVA of UNR Versus GES
Appendix B: ANOVA Tables of the 5 Regression Models
Appendix C: Diagnostics
Residual plots of model 1
Residual plots of model 2
Residual plots of model 3
Residual plots of model 4
Residual plots of model 5
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Petrakos, G., Rontos, K., Vavoura, C., Vavouras, I. (2023). Quantifying the Effects of Recent Economic and Fiscal Crises on Income Inequality in Greece. In: Tsounis, N., Vlachvei, A. (eds) Advances in Empirical Economic Research. ICOAE 2022. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-031-22749-3_28
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