Income inequality in the European Union: evidence from a panel analysis

Understanding the reasons underlying income inequality has generated considerable interest in the last years and various theoretical analyses have been developed to explain international differences in income distribution between groups of countries at different stages of economic development. However, structural investigations of the contemporary effects of the forces shaping the evolution of income inequality are difficult to find. Moreover, little attention has been given to the increasing inequality merely among advanced economies. For these reasons, we develop a theoretical framework to provide a comprehensive analysis of the factors affecting income distribution in a particular set of advanced economies, the European Union countries, and utilize a fifteen year panel of 25 countries to identify the short term effects of several considerable determinants of household income inequality. On the basis of the main findings, we conclude providing some policy indications.