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Mariela Baeva
Mariela Baeva
Member of the European Parliament for Bulgaria
2007 - 2009
(first direct EP elections in Bulgaria);

LEED to OECD partner (Nanotech)

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Income Inequality in the European Union

Poor growth performance over the past decades in Europe has increased concerns for rising income dispersion and social exclusion. European authorities have recently launched the Europe 2020 strategy** which aims to improve social inclusion in Europe on top of already existing European regional policies aiming to reduce regional disparities through stimulating growth in areas where incomes are relatively low.

Inequality in Europe has risen quite substantially since the mid-1980s. While the EU enlargement process has contributed to this, it is not the only explanation since inequality has also increased within a “core” of 8 European countries.

The recession of the past few years has evoked growing academic and political interest in finding broader measures for economic performance than GDP growth. These have included social dimensions, such as income dispersion, and various indicators of wellbeing***.

Policies for redistributing individual incomes remain however at the sole charge of national governments. With deeper integration Europeans are likely to look more beyond their national borders when they make relative income comparisons.

Italians have seen the lowest growth in their incomes since 1995 while the so-called “catching up economies” such as Ireland, Poland and the Slovak Republic have gained the most. Compared to both the United States and the whole OECD, Europeans on average and especially in the euro area appear to have lost ground.

Cross-country differences in the level of disposable income inequality can be traced back to differences in labour market outcomes, household composition, concentration of capital income and differences in the progressivity of tax and transfer systems****.

Concerns for social cohesion in the Union, including inequality, also appear now to be gaining momentum. Inequality in Europe is found to be high, though clearly below the level in the United States.


*Excerpts from OECD Economics Department Working Papers No. 952/2012

** Europe 2020 – Key Documents

***The conclusions of the Stiglitz-Fitoussi-Sen Commission initiated in 2008 provide a good example.

****A tax is considered to be progressive when the tax paid by of high income groups constitutes a higher share of their income than for lower earners. Similarly, a transfer is considered to be progressive when it constitutes a larger share of a low income than a higher income (relative progressivity).

12 Responses to Income Inequality in the European Union

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