EMU and the dynamics of regional per capita income inequality in Europe

Abstract

This paper analyzes the evolution of per capita income inequality among 197 European regions between 1977 and 2003, and seeks evidence of the relationship between the European Economic and Monetary Union (EMU) and interregional income inequality. The conclusion is that overall interregional income inequality has decreased since 1977, owing to a decrease in between-country inequality. The panel analysis conducted in this paper suggests that the adoption of the common currency has, thus far, exacerbated regional inequality in poorer EU countries, while it has not significantly affected regional inequality within richer countries. Inequality in less advanced countries has also increased with the establishment of the convergence criteria and with the implementation of the Single Market.