Who Did Safety Nets Catch During the Great Recession and How? A Comparison of Eleven OECD Countries

Abstract

This paper compares the amount of income protection eleven OECD countries provided over the Great Recession. Using household-level data, I calculate the recession’s impact on earned income across the income distribution among the non-elderly populations, and investigate the degree to which additional government transfers compensated for these income losses. While the recession’s impact on earned income varied significantly both across and within countries, in most countries additional government transfers offset steep income declines, and reversed increases in income inequality. Overall I fail to find that the size or distributional features of nations’ responses were correlated with welfare regime type nor prior amount spent on social policies. Taking the recession’s impact into account, both large and small welfare regimes had different mixes of policies; however I find similarity in the extent to which they cushioned citizens from declines in market income. A failure to find evidence that responses were shaped by welfare regime type, but rather by the recession’s impact, lends support to arguments that the conditions of an economic crisis constrain the usual conduct of politics.