Regional Income Distribution in the European Union: A Parametric Approach

Abstract

This work studies trends in income distributions and inequality in the Euro- pean Union using data from the European Union Statistics on Income and Living Conditions. We model the income distribution for each country under a Dagum distribution assumption and using maximum likelihood techniques. We use pa- rameter estimates to form distributions for regions defined as finite mixtures of the country distributions. Specifically, we study the groups of new" and old" countries depending on the year they joined the European Union. We provide formulae and estimates for the regional Gini coefficients and Lorenz curves and their decomposition for all the survey years from 2007 through 2011. Our esti- mates 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.