Drivers of Growing Income Inequalities in OECD and European Countries

Abstract

The gap between rich and poor in Organisation for Economic Co-operation and Development (OECD) and European Union (EU) countries has reached its highest level over the past three decades. This chapter first presents some comparisons on income inequality trends between European and OECD countries (Sect. 3.2). We focus in the following section on the evolution of the situation in the past decades (Sect. 3.3). During this period, income distributions have been profoundly transformed by the interplay of globalisation, technological change and regulatory reforms leading to profound structural changes in labour markets. In addition, taxes and benefits have tended to redistribute less from the mid-1990s up to the crisis. These factors, along with a number of demographic and social trends, are key to understanding the rise in income inequality in the OECD area and EU countries. Following the approach of identifying policies which are effective in tackling inequality, the OECD proposes a strategy based upon four pillars: women’s participation, employment, skills and education, and redistribution (Sect. 3.4).