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Education and Income Inequality in the Regions of the European Union

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  • Rodríguez-Pose, Andrés

    ()
    (London School of Economics)

  • Tselios, Vassilis

    ()
    (London School of Economics)

Abstract

This paper provides an empirical study of the determinants of income inequality across regions of the EU. Using the European Community Household Panel data set for 102 regions over the period 1995-2000, it analyses how microeconomic changes in human capital distribution affect income inequality not only for the whole of the population but also for normally working people. Human capital distribution is measured in terms of both educational attainment as well as educational inequality. Income and educational inequalities are calculated by a generalised entropy index (Theil index). Different static and dynamic panel data analyses are conducted in order to reduce measurement error on inequalities and minimise potential problems of omitted-variable bias. Taking into account the specification tests applied to the estimated models, the regression results reveal that, while the relationship between income inequality and income per capita is positive, the long-run relationship between income inequality and educational attainment is not statistically significant. This paper also agrees with the current belief that educational inequality has a positive relationship with income inequality. Across European regions high levels of inequality in educational attainment are associated with higher income inequality. This may be interpreted as the responsiveness of the EU labour market to differences in qualifications and skills. The above results are robust to the definition of income distribution. Other results indicate that population ageing and inactivity are sensitive to the specification model, while work access and latitude are negatively associated to income inequality. Urbanisation has a negative impact on inequality but for the whole of the population only. Furthermore, the relationship between unemployment and income inequality is positive. Female participation in the labour force is negatively associated with inequality and explains a major part of the variation in inequality. Finally, as expected, income inequality is lower in democratic welfare states, in Protestant areas, and in regions with Nordic family structures (i.e. Swedish and Danish regions).

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Bibliographic Info

Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number DYNREG09.

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Length: 56 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:esr:wpaper:dynreg09

Note: DYNREG Research Project – Dynamic Regions in a Knowledge-Driven Global Economy: Lessons and Policy Implications for the European Union
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Keywords: DYNREG; Income inequality; educational attainment; educational inequality; regions; Europe;

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Cited by:
  1. Rodríguez-Pose, Andrés & Tselios, Vassilis & Winkler, Deborah & Farole, Thomas, 2013. "Geography and the Determinants of Firm Exports in Indonesia," World Development, Elsevier, vol. 44(C), pages 225-240.
  2. Psycharis, Yannis & Rodríguez-Pose, Andrés & Tselios, Vassilis, 2012. "Public investment and regional growth and convergence: Evidence from Greece," CEPR Discussion Papers 9011, C.E.P.R. Discussion Papers.
  3. Vassilis Tselios, 2009. "Growth and Convergence in Income Per Capita and Income Inequality in the Regions of the EU," Spatial Economic Analysis, Taylor & Francis Journals, vol. 4(3), pages 343-370.
  4. Rodríguez-Pose, Andrés & Tselios, Vassilis, 2008. "Mapping Regional Personal Income Distribution in Western Europe: Income per Capita and Inequality," Papers DYNREG33, Economic and Social Research Institute (ESRI).
  5. Kim, Dong-Hyeon & Lin, Shu-Chin, 2011. "Nonlinearity in the financial development–income inequality nexus," Journal of Comparative Economics, Elsevier, vol. 39(3), pages 310-325, September.
  6. Andrés Rodríguez-Pose & Vassilis Tselios, 2010. "Inequalities in income and education and regional economic growth in western Europe," The Annals of Regional Science, Springer, vol. 44(2), pages 349-375, April.
  7. Rafael Alvarado & Miguel Atienza, 2014. "The role of market access and human capital in regional wage disparities: Empirical evidence for Ecuador," Documentos de Trabajo en Economia y Ciencia Regional 53, Universidad Catolica del Norte, Chile, Department of Economics, revised Mar 2014.
  8. Checchi, Daniele & van de Werfhorst, Herman G., 2014. "Educational Policies and Income Inequality," IZA Discussion Papers 8222, Institute for the Study of Labor (IZA).
  9. Rodríguez-Pose, Andrés & Tselios, Vassilis, 2011. "Welfare regimes and the incentives to work and get educated," CEPR Discussion Papers 8187, C.E.P.R. Discussion Papers.
  10. Agasisti, Tommaso & Cordero-Ferrera, Jose M., 2013. "Educational disparities across regions: A multilevel analysis for Italy and Spain," Journal of Policy Modeling, Elsevier, vol. 35(6), pages 1079-1102.

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