Income inequality in European Regions: Recent trends and determinants

Abstract

Income inequality is both at the political and academic agenda. Because of the Great Recession, income inequality has experienced an increase in many parts of the world in general and in many European regions in particular. In addition, several academics have signalled inequality as a source of such crisis. Nevertheless, few attempts have been made for conducting the analysis at the regional level. In this work we analyse the main factors behind current trends in inequality in Europe over the last decade. We develop our analysis at the regional level, which adds a new dimension to the existing literature. Our results point to a large diversity in inequality patterns. Inequality is on average lower in more developed regions, but recent increases in inequality seem associated with economic growth. Our results suggest that tertiary specialisation, openness, and technological change, although likely to be associated with economic growth, are also associated with increasing inequalities.