Thank goodness for stickiness: Unravelling the evolution of income-related health inequalities before and after the Great Recession in Europe

Abstract

The Great Recession in Europe sparked concerns that the crisis would lead to increased income related health inequalities (IRHI). Did this come to pass, and what role, if any, did government transfers play in the evolution of these inequalities? Motivated by these questions, this paper seeks to (i) study the evolution of IRHI during the crisis, and (ii) decompose these evolutions to examine the separate roles of government versus market transfers. Using panel data for 7 EU countries from 2004 to 2013, we find no evidence that IRHI persistently rose after 2008, even in countries most affected by the crisis. Our decomposition reveals that, while the health of the poorest did indeed worsen during the crisis, IRHI were prevented from increasing by the relative stickiness of old age pension benefits compared to the market incomes of younger groups. Austerity measures weakened the IRHI reducing effect of government transfers.