Income inequality in Europe and the US: a partisan issue?

Abstract

<p>This paper discusses the levels, trends and causes<br />of income inequality in Europe and the US. On<br />the one hand, it finds that although market<br />income inequality has generally risen, it did so<br />more in some countries and less in others. On<br />the other hand, disposable income inequality<br />has had a puzzling irregular development. The<br />latter is higher in the US, whereas in Europe<br />three clusters of countries exist: Mediterranean<br />and Central and Eastern European (CEE)<br />countries have the highest disposable income<br />inequality –with the UK being the only rich EU<br />country belonging to this group. Continental<br />Europe has medium to low inequality while the<br />lowest is found in the Scandinavian ones. The<br />only exceptions to this ranking are some of the<br />CEEs who belong to the group with the lowest<br />disposable income inequality. It is argued that<br />the best explanation for this classification and the<br />national disposable income inequalities’ history<br />is the different national public policy, that is,<br />national redistributive policies, different taxation<br />systems and social security contributions, which<br />stems from the political ideology of the ruling<br />party, the overall effectiveness and generosity of<br />redistributive policies.</p>