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The impact of EU integration on the Portuguese distribution of employees' earnings

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  • João Sousa Andrade

    ()
    (GEMF/Faculdade de Economia, Universidade de Coimbra, Portugal)

  • Adelaide Duarte

    ()
    (GEMF/Faculdade de Economia, Universidade de Coimbra, Portugal)

  • Marta Simões

    ()
    (GEMF/Faculdade de Economia, Universidade de Coimbra, Portugal)

Abstract

This paper investigates the impact of Portugal’s accession to the EU on employees’ earnings inequality using data for the years 1985 and 1991 from the Quadros de Pessoal database. The distributions of earnings for the two years are compared using distinct empirical methodologies to better clarify the nature of inequality at the aggregate level: cardinal measures of inequality and the Lorenz stochastic dominance approach (Araar and Duclos, 2007); the Relative Distribution approach; and covariate (education) decomposition. Our results indicate that during the period under analysis the median and average earnings of employees increased, pointing to a sort of honeymoon effect of EU integration on Portuguese employees’ earnings, but which was characterized by an increase in earnings inequality. Relative to 1985, in 1991 there were more employees with very low earnings but also more 1991 employees with high earnings and there were also more employees at the bottom end and at the top end of the earnings distribution. Moreover, the analysis of the relative earnings distribution by level of education reveals substantial differences for the top end of the distributions with the proportion of 1991 employees receiving the highest earnings higher than for the original 1985 cohort. These results deserve a deeper investigation since inequality may jeopardize future growth of the Portuguese economy. Similar analysis should also be carried out for recent and predictable future members of the EU.

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Bibliographic Info

Paper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number 2010-08.

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Length: 23 pages
Date of creation: Jun 2010
Date of revision:
Handle: RePEc:gmf:wpaper:2010-08

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Keywords: earnings inequality; education inequality; relative distribution; covariate decomposition;

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  1. Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
  2. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
  3. Ben Jann, 2008. "Relative distribution methods in Stata," German Stata Users' Group Meetings 2008 01, Stata Users Group.
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  5. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September.
  6. Lindert, Peter H., 2000. "Three centuries of inequality in Britain and America," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 3, pages 167-216 Elsevier.
  7. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
  8. Alesina, Alberto & Perotti, Roberto, 1994. "The Political Economy of Growth: A Critical Survey of the Recent Literature," World Bank Economic Review, World Bank Group, vol. 8(3), pages 351-71, September.
  9. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
  10. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, octubre-d.
  11. Budria, Santiago & Nunes, Celso, 2005. "Education and Wage Inequality in Portugal," MPRA Paper 1099, University Library of Munich, Germany.
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