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Working paper 657

Gordon Anderson, Oliver Linton, Grazia Pittau, Yoon Jae Whang, Roberto Zelli, "Are Eurozone Household Income Distributions Converging? Introducing MGT and DisGini, New Tools for Multilateral Distributional Comparisons.", 2020-02-20
Main Text (application/pdf) (616,124 bytes)

Abstract: The recent rise of economic nationalism together with the economic demise or potential departure of some of its constituent nations, has raised concerns regarding the coherence of the European Union. Formed to promote commonality of wellbeing among its constituents, there is interest in seeing whether its nation income distributions are converging. The usual practice of comparing per capita incomes has met with some criticism in the treatment e ects and convergence literatures (Carniero et. al. 2003, Durlauf and Quah 2002) since such moment comparisons can mask important distributional differences relevant for analysis. Here, in response to these concerns, some indices and tests for quantifying the commonality or di erentness in collections of distributions are proposed and implemented in the context of a sigma convergence study of 21st century Eurozone household income distributions. The results indicate that, when the Eurozone is considered as an entity with no nation boundaries, in a latent four class mixture distribution model, both weighted and unweighted versions of the statistics record convergence as the theory predicts for such a confederation. However
when constituent nations are considered as separate entities within a confederation, unweighted versions of the tests record convergence, whereas weighted versions reveal divergence with increasing segmentation among the more populous nations in the Eurozone outweighing the convergent patterns exhibited by the smaller populated countries recently admitted to the Eurozone.

Keywords: Distributional Differences, Inequality Indices,Multilateral Comparisons

JEL Classification: O47;I31