Income Inequality in the EU: How Do Member States Contribute?

Christos Papatheodorou, Dimitris Pavlopoulos, (2014) "Income inequality in the EU: how do member states contribute?", International Journal of Social Economics, Vol. 41 Iss: 6, pp.450-466

Posted: 14 Jun 2014

See all articles by Christos Papatheodorou

Christos Papatheodorou

Panteion University of Social and Political Sciences; Labour Institute - Greek General Confederation of Labour

Dimitris Pavlopoulos

VU University Amsterdam - Faculty of Social Sciences

Date Written: February 5, 2013

Abstract

Purpose – The purpose of this paper is to analyse the structure of overall inequality in the EU-15 by investigating the extent to which total inequality is attributed to inequality between or within the individual countries. Also, the paper examines whether the contribution of between-country and within-country components changed in the period between 1996 to 2008, before the outbreak of the economic crisis.

Design/methodology/approach – The paper applies a decomposition analysis by population subgroup utilizing micro-data from the ECHP and EU-SILC surveys. A number of inequality indices are employed to capture the different aspects of inequality and test the robustness of the results.

Findings – The analysis shows that the between-countries differences account only for a small part of overall inequality in the EU-15. Furthermore, the contribution of the between county component to total inequality has shrunk dramatically during the examined period. The overall EU inequality has been affected disproportionally by income disparities at the various parts of the income distribution in different countries.

Practical implications – Policies aiming to reduce inequality within each country would be far more effective in reducing overall inequality in the EU than policies targeting to reduce only disparities between member states.

Originality/value – The findings question the effectiveness of EU policy priorities to decrease inequality that have mainly focused on reducing cross-country and/or regions differences regarding certain macroeconomic indicators such as per-capita income (or GDP). The evidence suggests that the social protection system provides a useful tool in explaining the differences in inequality between countries and their contribution to overall EU inequality.

Keywords: Decomposition analysis, EU, Income distribution, Welfare state regimes

JEL Classification: D30, D31, I30, I38

Suggested Citation

Papatheodorou, Christos and Pavlopoulos, Dimitris, Income Inequality in the EU: How Do Member States Contribute? (February 5, 2013). Christos Papatheodorou, Dimitris Pavlopoulos, (2014) "Income inequality in the EU: how do member states contribute?", International Journal of Social Economics, Vol. 41 Iss: 6, pp.450-466, Available at SSRN: https://ssrn.com/abstract=2449961

Christos Papatheodorou (Contact Author)

Panteion University of Social and Political Sciences ( email )

Syggrou Avenue 136,
Athens, 176 71
Greece

HOME PAGE: http:// https://christospapatheodorou.com

Labour Institute - Greek General Confederation of Labour ( email )

71A Emmanouil Benaki str.,
Athens, 10681
Greece

HOME PAGE: http://https://christospapatheodorou.com

Dimitris Pavlopoulos

VU University Amsterdam - Faculty of Social Sciences ( email )

De Boelelaan 1081
Amsterdam, 1081 HV
Netherlands

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