Equilibrium and Convergence in Income Distribution: The Case of 28 European Countries in the Recent, Turbulent Past (1995-2019)

The authors developed a political economy equilibrium framework for personal income distribution. In the beginning, they set up a theoretical model which was rooted in status theory. With this concept, one may explain a certain or optimal degree of inequality in society and define a steady state to...

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Bibliographic Details
Published in:Central European economic journal. 2021-01, Vol.8 (55), p.95-125
Main Authors: Guo, Yanling, Sell, Friedrich L
Format: Article
Language:English
Subjects:
collective decision making
D31
D63
D72
Developing countries
Economic crisis
Economic history
Equilibrium
Eurozone
Evaluation research
Hypotheses
Income distribution
Income inequality
inequity convergence
LDCs
Market economies
Personal income
personal income distribution
Political economy
Present Times (2010 - today)
redistributive policies
Transformation Period (1990 - 2010)
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Summary:The authors developed a political economy equilibrium framework for personal income distribution. In the beginning, they set up a theoretical model which was rooted in status theory. With this concept, one may explain a certain or optimal degree of inequality in society and define a steady state to which inequality can converge. By taking the aggregated Gini coefficient due to a collective decision process, deviations from the steady state due to shocks are allowed. A return to equilibrium is feasible with speed which is compatible with the collective decisionmaking process. The authors then conducted an empirical analysis of personal income distribution in 28 European nations for the period before, during and after the great recession of 2009/2010 and the Euro crisis of 2010/2015 (1995–2019). Not surprisingly, they found inequality convergence in the data. However, the speed of convergence is not the same for all countries.
ISSN:2543-6821
2544-9001
2543-6821
DOI:10.2478/ceej-2021-0007