The evolution of income inequality in the European Union during the period 1993-1996

The objective of this work is to analyse the income inequality in the 15 EU countries during the convergence process to the Monetary Union, using the information contained in the European Community Household Panel, corresponding to the four first waves. Using the inverse second order stochastic dominance concept, an ordering of these countries has been carried out. Furthermore, this ranking allows one to determine if the differences among EU country members have increased or decreased during this particular period. Whether the inequality of income has diminished within and between countries over time was studied. Gini's generalized family indices proposed by Donaldson and Weymark (Journal of Economic Theory 22: 67-86, 1980 and 29: 353-8, 1983) and Yitzhaki (International Economic Review 24: 617-28, 1983) have been used. This allows one to test the sensitivity of the results obtained to different degrees of inequality aversion and to different equivalence scales, taking into account household sizes.