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This working paper attempts to shed light on distributional effects of recent fiscal consolidation policies, mainly through the channel of in-kind public transfers. We look at the distribution of income in 16 EU countries during the recent global financial and economic crisis, and the subsequent period of fiscal consolidation. Experiences in terms of the depth of the recession and the policies implemented to deal with vary greatly across EU countries. We illustrate this diversity, and show how the crisis has accentuated the differences among EU countries, both in income levels and in inequality. The effects of the public sector on household income distribution have traditionally been measured through the effects of money transfers and taxes, but in developed economies in-kind transfers are of increasing importance. In our context, the analysis of in-kind transfers –mainly education and health– from a distributional perspective is of paramount importance, since fiscal consolidation programmes have led to a reduction in public expenditure in these services in many countries. We mainly use the EU Survey of Income and Living Conditions (EU-SILC), which allows us to track the distributional effects of public interventions in the economy, namely money transfer and taxes. For in-kind services we impute benefits at the individual level from the EUSILC database. Starting from aggregate figures, we make a number of adjustments and arrive at an extended household income. Finally, we measure the distribution in this extended income for all countries in the analysis, before and after the crisis. Our results point to the absence of relative inequality effects of fiscal consolidations in those countries where public sector cuts have been deeper. This fact is due to the emphasis on measuring inequality in relative terms, given that primary incomes have fallen by more than the cuts in public services provided to citizens.
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