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Inequality and Unemployment Patterns in Europe: Does Integration Lead to (Real) Convergence?

Mercedes Monfort, Javier Ordóñez () and Hector Sala
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Mercedes Monfort: Instituto de Economía Internacional

Open Economies Review, 2018, vol. 29, issue 4, 703-724

Abstract: Abstract The economic convergence criteria adopted in the Maastricht Treaty and the fiscal discipline of the Stability and Growth Pact enforced nominal convergence, leaving aside real convergence indicators. In this paper, we use cluster analysis to examine the convergence patterns of income inequality, absolute redistribution (a measure of governments’ effectiveness in correcting for inequality) and unemployment. The expected outcome after years of economic integration was, ex-ante, convergence to a single cluster. Our results, however, uncover a variety of groups, implying that economic integration has not led to real economic convergence. Moreover, the existence of different patterns suggests: (i) that traditional classifications (Anglo-Saxon, Continental European, European Periphery, and Nordic models) remain broadly valid; (ii) that there is no unemployment-inequality trade-off to be exploited in terms of economic policy; and (iii) that the redistributive capacity of governments plays a pivotal role in coping with inequality without negative effects in terms of unemployment.

Keywords: Europe; Convergence; Clusters; Unemployment; Inequality; Redistribution (search for similar items in EconPapers)
JEL-codes: C33 D63 F15 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Inequality and unemployment patterns in Europe: Does integration lead to (real) convergence? (2016) Downloads
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