Regional Income Distribution in the European Union: A Parametric Approach

This chapter studies trends in income distributions and inequality in the European Union using data from the European Union Statistics on Income and Living Conditions. The author models the income distribution for each country under a Dagum distribution assumption and using maximum likelihood techniques. The author uses parameter estimates to form distributions for regions defined as finite mixtures of the country distributions. Specifically, the author studies the groups of 'new' and 'old' countries depending on the year they joined the European Union. The author provides formulae and estimates for the regional Gini coefficients and Lorenz curves and their decomposition for all the survey years from 2007 through 2011. The estimates of this study show that the 'new' European Union countries have become richer and less unequal over the observed years, while the 'old' ones have undergone a slight increase in inequality which is however not significant at conventional levels.