European Integration and Income Inequality

Abstract

Globalization has attained a prominent place on the sociological agenda, and stratification scholars have implicated globalization in the increased income inequality observed in many advanced capitalist countries. But sociologists have given much less attention to a different yet increasingly prevalent form of internationalization: regional integration. Regional integration, or the construction of international economy and polity within negotiated regions, should matter for income inequality. Regional economic integration should raise income inequality, as workers are exposed to international competition and labor unions are weakened. Regional political integration should also raise income inequality, but through a different mechanism: political integration should drive welfare state retrenchment in market-oriented regional polities as states adopt liberal policies in a context of fiscal austerity. Evidence from random-effects and fixedeffects models of income inequality in Western Europe supports these arguments. The results show that regional integration explains nearly half of the increase in income inequality in the Western European countries analyzed in this article. The effects of regional integration on income inequality are net of several controls, including two established measures of globalization, suggesting that a sociological approach to regional integration adds to our understanding of rising income inequality in Western Europe.