European Integration and Inequality Among Countries: A Lifecycle Income Analysis

Abstract

We analyze the effects of the expansions of the European Union on inequality using an approach based on individuals' lifecycle incomes. This allows us to consider the effect of different rates of growth and survival rates. This differs form the usual analyses of inequality that focus on the evolution of current per capita income for the period. Our results show that inequality in terms of permanent income was substantially less than in current per capita income at the time of all the expansions except those of the last ten years. The results point to the key role of policies that stimulate growth in the less developed countries. With an annual β-convergence of 2% in current income, inequality in permanent income would be one third lower.