The challenge of European inequality

In this chapter, the policy consequences of inequality in the Eurozone are measured, analysed, and discussed. Market income inequality among European households is lower than in the USA, where there are relatively more households at both ends of the distribution. However, the distribution of income is more similar among US regions than among Eurozone countries. European incomes are ‘geographically clustered’, with the poor being concentrated in a few (especially Southern) countries. Furthermore, although market income inequality is high among wealthier Northern countries, their redistributive policies are effective in reducing inequality. In contrast, redistribution in Southern Europe is less far reaching, reinforcing the geographical clustering. These patterns imply that forging a common European approach to inequality and redistribution may be much more difficult than hitherto appreciated.