Measuring the European Income Distribution. An Analysis of Differences Among Welfare State Regimes

This paper evaluates income inequality in the EU-28 for 2014 by using data from the European Survey on Income and Living Conditions (EU-SILC). Calculating the Theil index, which allows me to additively decompose the sources of inequality into a within and between component, I find an aggregated inequality for the EU-28 of 0.213. Across countries differences in nequality range significant between a Theil of 0.099 in Slovakia and 0.430 in Romania. Dividing the sample into household-type subgroups the results show that inequality in the EU-28 is highest for households with household heads older than 60 years and lowest for households with children. Analysing the redistribution impact of social transfers at the national level I find that inequality decreases sharply from 0.598 for pre-transfer incomes to 0.213 for post-transfer incomes. However, the contribution of between-country differences to the aggregated inequality increases from 10.7% to 20.8%. Moreover, I evaluate the impact of the welfare state regime and find that social democratic countries show the lowest, whereas Baltic countries show the highest income inequality. Analysing if a country is relatively over- respectively under-represented in a certain income decile of the EU-28, I find that social democratic, central European and liberal market economies are over-represented at the top and under-represented at the first income decile, while Baltic countries show the opposite result.