Varieties of Economic Inequality Recently, the issue of inequality has regained attention in economic and political debates Although this interest is welcome, the debate is still mostly focused on income or wealth distribution, which is an important aspect but does not present a complete view of inequality Most of the theoretical and empirical studies produced by economists concern personal income distribution or factor income distribution This is more evident in the studies of the evolution and characteristics of contemporary capitalism and globalisation Varieties of Economic Inequality considers both theoretical perspectives and empirical evidence of aspects such as income, gender, race, technology, power, region, education and class Ultimately, this text rejects the idea of supposed long-run constant factor shares, the positive effects of inequality and the greater importance of absolute level of income compared to its unequal distribution, and instead reveals the structural inequalities that exist within societies This book advocates a move away from the focusing on inequality at the level of the individual and suggests policy for eradicating these various forms of inequality It is suitable for those who study political economy, social inequality as well as economic theory and philosophy Sebastiano Fadda is Professor in the Department of Economics, Roma Tre University, Italy He teaches advanced labour economics, and economic growth Pasquale Tridico is Professor in the Department of Economics, Roma Tre University, Italy He is lecturer in labour economics and in economic policy He is also Jean Monnet Chair in European Economic Studies Routledge Advances in Heterodox Economics Edited by Wolfram Elsner, University of Bremen and Peter Kriesler, University of New South Wales Over the past two decades, the intellectual agendas of heterodox economists have taken a decidedly pluralist turn Leading thinkers have begun to move beyond the established paradigms of 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Richard P McIntyre This page intentionally left blank Varieties of Economic Inequality Edited by Sebastiano Fadda and Pasquale Tridico First published 2016 by Routledge Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2016 selection and editorial material, Sebastiano Fadda and Pasquale Tridico; individual chapters, the contributors The right of the editors to be identified as the author of the editorial material, and of the authors for their individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988 All rights reserved No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Names: Fadda, Sebastiano, editor | Tridico, Pasquale, 1975– editor Title: Varieties of economic inequality / edited by Sebastiano Fadda and Pasquale Tridico Description: Abingdon, Oxon ; New York, NY : Routledge, 2016 Identifiers: LCCN 2015036972| ISBN 9781138928015 (hardback) | ISBN 9781315682099 (ebook) Subjects: LCSH: Income distribution | Equality – Economic aspects | Distributive justice | Social justice Classification: LCC HB523 V37 2016 | DDC 339.2–dc23 LC record available at http://lccn.loc.gov/2015036972 ISBN: 978-1-138-92801-5 (hbk) ISBN: 978-1-315-68209-9 (ebk) Typeset in Times New Roman by HWA Text and Data Management, London Contents List of figures List of tables List of contributors Acknowledgements Introduction: bridging theories and evidences of varieties of inequality ix xi xii xiii S ebastiano Fadda and Pas q uale T ridico Part I Definitions and approaches Not just slicing the pie: the need for a broader approach to economic inequality 11 Pas q uale D e M uro Income inequality: what causes it and how to curb it 22 S ebastiano Fadda Gender, class and the crisis 48 Valeria C irillo , M arcella C orsi and C arlo D ’ I ppoliti Economic inequality, political power and political decision-making: the case of the “middle-income trap” 73 S venja F lechtner and S tephan Panther Part II Empirical evidence and policy suggestions 97 Welfare models, inequality and economic performance during globalisation 99 Pas q uale T ridico viii Contents Labour market institutions and wage inequality within education groups in Europe 113 C ristiano P erugini and Fabri z io P ompei Do rights matter? Comparing inequalities in the governance of the EU 144 C harles D annreuther Modern technologies, modern disparities: regional inequalities in innovations in the EU countries 157 J ace k Wall u sch and B eata W o ź nia k - J ę ch o r e k A classification of school-to-work transition regimes 170 F rancesco Pastore 10 Youth unemployment and the disadvantages of the young in the labour market 197 E nrico M arelli and M arcello S ignorelli Index 217 Figures 2.1 Labour share on GDP in G7 economies 2.2 Adjusted wage shares, continental European countries 2.3 Gini coefficients 2.4 Income and intergenerational earnings inequalities 2.5 Incomes inequality and intergenerational income mobility 2.6 Correlation between trust and income inequality 2.7 Inequality and real GDP per capita in OECD countries 2.8 Inequality and unionization in OECD countries 2.9 Union coverage and inequality in OECD countries 2.10 Diminishing fiscal redistribution 2.11 Respective distributive effects of direct taxes and cash transfers 2.12 Redistributive impact of income taxes and transfers in the EU 2.13 Gini coefficients for income and wealth 3.1 Changes in income by gender and geographical area 3.2 Changes in shares of income by gender and geographical area 3.3 Cumulative GDP change and changes in average incomes by EU country 3.4 Fiscal consolidation and changes in average incomes by EU country 4.1 Gini coefficient in first year of middle-income status and 20-year average growth rate 4.2 AR’s political economy of development approach 4.3 Governance structure, wealth inequality, productivity, and inequality of opportunity 4.4 GDP per capita in five countries 4.5 GDP growth rates in four countries 4.6 Total factor productivity in four countries 4.7 Gini coefficients in Brazil and the Dominican Republic 4.8 Human capital index and average years of schooling 5.1 Capital mobility in terms of FDI 5.2 Globalisation in terms of trade intensification 5.3 FDI in the world economy 5.4 Inequality 5.5 Wage share in advanced economies 5.6 Welfare expenditure by models 5.7 The Performance Index 5.8 Inequality by welfare models 27 27 28 28 29 29 31 33 34 39 40 41 42 58 59 60 61 74 76 77 81 82 82 83 89 100 101 103 104 105 106 107 108 208  Enrico Marelli and Marcello Signorelli Considering long-term unemployment (longer than 12 months) as percentage of labour force (LTU), we find very high values for young cohorts (15–24 and 25–29) and a significant increase during crisis years In 2014, LTU was particularly high in Greece (31.5 per cent the total rate for 15–24 years and 28.2 per cent for 25–29 years), Italy (25.1 per cent and 13.8 per cent respectively), Croatia (22.6 per cent and 12.3 per cent), Spain (21.5 per cent and 13.4 per cent), Slovakia (17 per cent and 10.2 per cent), as compared to the average EU figures (7.8 per cent and per cent for the two cohorts) Very low LTU for young people are recorded in Denmark, Finland, Sweden, Germany, Austria The relative position of young people in the labour market depends not only on the probability to find a job and on the length of the unemployment condition, but also on the type of work and its remuneration In fact, economists and sociologists have deeply debated about the “working poor” (e.g., Bazen et al., 1998; Peña-Casas and Latta, 2004; Fraser et al., 2011) Furthermore, the policies for the labour market – even in the EU following the Lisbon Agenda of 2000 – have set the aim to create “more and better jobs” A discussion about human capital, the skill content of jobs, the importance (and incidence) of work in innovative occupations and in the R&D sector would be interesting, but beyond the scope of this chapter Some data, however, can be presented and are important since have an immediate impact on the distribution of income between different working groups As we have seen in the previous section, one strand in the literature maintains the young people exhibit a disproportionately larger incidence of “temporary” jobs, especially in countries that have adopted a flexibility approach oriented to remove restrictions to the entry into the labour market (rather than acting on dismissals, EPL, etc.) Many authors argue that youngsters, in this way, tend to hold “precarious” jobs, that often become a “trap”, leading also to higher risk of unemployment Table 10.5 refers to the incidence of temporary employment out of total employees The key evidence is the following: (i) the incidence is very high for the youngest cohort (15–24 years), reaching over 43 per cent in the EU as a whole: i.e about half of young workers in Europe hold temporary jobs; (ii) the incidence decreases with the age of the workers: it is about 23 per cent for 25–29 workers (and even less for subsequent age classes, although not shown in the table); (iii) the incidence has increased over time (it was less than 36 per cent in 2002); (iv) there are no significant differences between male and female workers The highest incidences of temporary employment are found in Slovenia (72.7 per cent in 2014 for the youngest cohort), Poland (71.2 per cent), Spain (69.1 per cent), Portugal (63 per cent); the lowest ones in Bulgaria, Romania, the three Baltic states and also in the U.K The ranking is rather similar also for the subsequent cohort (25–29 years) Concerning part-time employment, in the EU the incidence over total employment is significantly higher for young people (31.8 per cent in 2014) compared to all workers (20.3 per cent); moreover, it is increasing over time: in 2002, it was 21.4 per cent for young people, i.e one-third smaller As expected, the incidence is even greater for females: 40 per cent for young females 15–24 years old (up from 28 per cent of 2002), slightly greater than 38.5 per cent recorded by female workers of all ages (15–74 years) Considering the differences across countries, part-time employment is particularly important for young workers (all sexes) in the Netherlands (78.9 per cent in 2014), Denmark (66.9 per cent), Sweden (49.5 per cent), Ireland (45.2 per cent) Thus we can say that in Northern European countries, especially where the “flexicurity model” is prevailing, young people exhibit a better performance in the labour market – i.e lower YUR and NEET rates; however, they are penalized by different working conditions, for instance shorter working hours and consequently lower incomes This can be Youth unemployment  209 to some extent a voluntary choice, e.g in order to reconcile working and education choices (or family duties in case of less young female workers, according to a traditional view), but in some other cases it might be another type of discrimination (it is staggering that in the Netherlands more than 87 per cent of young female workers are part-time workers) It is also remarkable that in all countries, also where the incidences of temporary and part-time employment were initially very low, there has been an increase over time A final comment refers to the earnings received by young workers compared to mature workers In some countries, wages and compensations are much lower for young workers, although there are possibilities to increase over time, also thanks to the “seniority”; in some countries, the chances of career progression are high, thus productive and skilled young workers can quickly achieve good positions also from the point of view of compensations The available information (Eurostat data) is lacking for the generality of workers, employed in all firms Thus it is proper to focus on the firms with at least 10 employees, for which data are more complete Table 10.6 shows that the hourly earnings for young workers (less than 30 years) was in 2010, in the EU as a whole, around 10 euros, compared to 14 euros for all workers, hence about one-third less It is also interesting that the wage discrimination of women is sizeable for all ages (12.6 euros vs 15.4 for males), while it is very small in case of young workers The previously mentioned “gap” between the wages of young workers and all employees – about one third less – is more or less confirmed in all EU countries, both Continental, Northern or Southern; it seems a bit smaller in Eastern countries, including the Baltic and Balkan states, where of course the absolute level of hourly wages is much lower compared to the EU average or the other countries The 2008–2009 financial crisis, the following Great Recession, the subsequent Eurozone sovereign debt crisis and the ensuing austerity measures have caused a deep impact on the European labour markets The most exposed segments of the labour market have been young people, old workers, vulnerable employment in general The economic crises abruptly ended the gradual decline in global youth unemployment rates recorded before 2007 (ILO, 2012, 2014) In many European countries, the situation is particularly serious This is related to the greater sensitivity of youth unemployment to cyclical conditions (see p.197) According to many empirical studies, there are two characteristics of the Great Recession that have been particularly detrimental to young people: the financial origin of the crisis and the protracted recessions or stagnation, especially in the Eurozone As a matter of fact, in the EU we had a double-dip and even triple-dip recession in the 2007–2014 period; a key reason is that the austerity measures imposed by EU institutions to overcome the Eurozone debt crisis have been too deep and widespread, with harmful effects on employment and disproportionate consequences for youth unemployment The situation is even more worrying since, although a feeble recovery has commenced in many European countries, the risk is that it will be a “jobless” recovery (see ILO, 2014) The employment and unemployment impact of the crisis has been, however, differentiated across countries Germany’s case is outstanding, since unemployment has decreased even in crisis years In Europe, there have been two main types of adjustments: (i) in the most ‘flexible’ countries (such as Ireland, the Baltic states, Spain, that have followed an adjustment similar to the US), employment was cut rapidly and deeply, helping to maintain labour productivity, but at the cost of high and sudden increases in unemployment; (ii) in some other countries (not only Germany but also Japan, the Netherlands, Denmark, and Italy), labour hoarding practices, working hour adjustments and specific policy measures 27.3 12.0 21.0 14.5 16.6 14.6 Italy Cyprus Latvia Lithuania Luxembourg Hungary 36.4 31.2 Croatia Netherlands 48.5 France 8.8 65.2 Malta 25.5 51.4 Germany Spain 25.0 Denmark Greece 14.2 Czech Rep – 12.9 Bulgaria 12.5 27.4 Belgium Ireland 44.5 Eurozone–19 Estonia 35.8 EU–28 45.1 11.1 18.9 34.1 10.5 9.0 23.3 42.2 39.9 53.5 62.7 26.5 21.2 6.6 57.4 22.5 17.4 10.3 31.6 49.8 41.4 55.5 19.0 25.1 45.4 8.5 8.4 31.1 56.0 57.2 57.3 69.1 29.4 33.9 11.2 53.4 21.3 32.3 14.5 34.2 52.4 43.4 36.7 – 13.9 20.3 17.3 24.3 8.7 25.2 33.7 47.3 64.8 24.7 11.7 – 53.9 26.2 14.1 14.2 25.9 44.7 36.2 53.7 20.6 24.6 41.2 9.9 9.2 27.4 54.3 53.8 55.6 69.4 31.4 31.2 10.4 54.6 25.6 29.0 15.6 30.8 52.0 43.2 36.1 – 15.4 11.9 – 17.0 15.0 30.1 27.9 50.1 65.7 26.6 13.4 – 48.7 23.9 14.4 11.6 29.4 44.2 35.4 2002 2014 57.4 17.3 25.8 50.3 – 7.3 34.3 58.6 62.0 59.3 68.8 27.1 36.5 12.1 52.1 17.2 37.4 12.8 38.1 52.8 43.5 17.0 – 8.4 7.9 7.1 14.0 11.3 15.1 15.4 22.7 43.9 15.1 3.7 – 15.2 12.5 7.5 7.7 11.3 21.3 17.6 2002 24.3 5.2 9.0 12.4 4.4 3.8 17.6 22.3 21.7 20.7 43.5 15.7 8.2 1.9 21.5 14.0 8.2 5.5 12.9 24.3 21.3 2007 Total Female 2002 2014 Male 2002 2014 Total 2007 25–29 years 15–24 years Table 10.5  Temporary employment (percentage of total employees) 33.1 7.7 13.5 14.0 – 3.1 25.1 32.0 31.4 24.7 43.9 20.8 11.7 4.5 22.1 16.1 14.4 6.5 14.9 26.1 22.9 2014 16.5 – 8.6 7.3 9.3 19.0 9.1 13.2 16.4 18.9 41.9 13.9 3.6 – 16.3 8.5 5.7 8.3 8.4 19.9 16.4 2002 Male 32.9 7.0 13.6 13.1 – 3.9 21.7 29.0 27.3 22.5 43.5 19.2 10.5 4.0 22.2 13.3 12.0 6.2 12.9 24.8 21.6 2014 17.6 – 8.1 8.6 – – 13.4 17.5 14.2 27.0 46.4 16.6 3.8 – 14.0 16.8 10.1 7.1 14.6 23.0 18.9 2002 Female 33.4 8.4 13.3 14.9 – – 28.1 35.5 36.3 27.0 44.3 22.5 12.7 5.2 21.9 19.1 17.5 7.0 16.9 27.5 24.3 2014 13.3 49.4 51.3 12.0 Finland Sweden UK Source: Eurostat database 57.1 10.7 Slovakia 4.6 42.4 13.7 68.3 2.8 53.1 65.7 52.9 46.2 Portugal Slovenia 45.1 Poland 34.8 Romania 35.0 Austria 15.2 56.2 42.5 28.2 72.7 7.0 63.0 71.2 35.1 12.0 44.3 46.9 10.7 44.1 2.8 43.7 44.5 39.2 15.2 49.9 38.9 26.4 62.2 7.5 62.6 68.4 38.5 12.0 58.4 51.8 10.6 64.8 2.8 49.5 45.8 30.1 15.2 62.4 45.7 31.0 86.4 6.4 63.4 75.1 31.4 6.3 22.0 28.3 4.5 27.2 1.3 30.5 21.0 5.5 6.3 27.8 25.2 5.8 33.5 2.1 36.0 39.1 8.8 6.9 27.2 26.6 11.9 37.1 2.6 40.7 43.5 10.4 6.4 16.6 20.5 4.4 23.1 1.5 27.5 21.1 3.9 7.0 23.3 19.4 12.3 31.6 3.2 37.9 40.9 8.9 6.0 27.9 37.1 4.7 31.6 1.1 33.8 20.9 7.0 6.7 31.5 35.0 11.4 44.0 2.0 43.7 46.7 11.9 Table 10.6  Hourly earnings (in euros) – 2010 (firms with 10 employees or more) Total ages Less than 30 Total Male Female Total Male EU-28 14.08 15.37 12.62 10.04 10.18 9.88 Eurozone-19 15.20 16.49 13.67 10.50 10.69 10.29 Belgium 18.92 19.80 17.78 14.31 14.43 14.17 Bulgaria 2.04 2.18 1.89 1.83 1.89 1.76 Czech Republic 4.73 Female 5.43 6.00 4.56 4.70 4.39 Denmark 25.37 27.76 23.2 17.33 18.07 16.67 Germany 16.95 18.81 14.62 10.68 10.96 10.33 Estonia 4.84 5.73 4.17 4.55 5.06 4.04 Ireland 22.23 23.94 20.62 15.14 14.84 15.38 Greece 10.97 11.81 10.03 7.28 7.30 7.25 Spain 11.50 12.43 10.41 8.78 9.05 8.52 France 16.27 17.54 14.8 11.79 11.81 11.76 Croatia 5.87 6.03 5.69 4.64 4.59 4.71 Italy 14.48 14.82 14.04 9.87 10.04 9.64 Cyprus 12.08 13.12 10.91 7.71 7.84 7.56 Latvia 3.78 4.14 3.5 3.63 3.82 3.43 Lithuania 3.44 3.68 3.24 3.27 3.31 3.21 21.95 22.64 20.67 15.59 15.37 15.93 4.49 4.91 4.04 3.82 3.85 3.79 Luxembourg Hungary Malta 8.46 8.71 8.08 7.21 7.19 7.22 Netherlands 17.25 18.85 15.56 11.29 11.29 11.30 Austria 14.77 16.37 12.45 10.55 11.02 9.88 Poland 5.21 5.32 5.08 4.04 4.08 3.99 Portugal 7.71 8.23 7.18 5.16 5.3 5.00 Romania 2.63 2.74 2.5 2.26 2.26 2.26 Slovenia 9.10 9.13 9.07 7.02 6.75 7.43 Slovakia 4.74 5.24 4.21 4.18 4.34 3.98 Finland 18.12 20.35 16.22 14.34 15.18 13.57 Sweden 17.77 19.33 16.31 14.28 14.88 13.69 United Kingdom 16.98 19.20 14.72 11.79 12.23 11.34 Source: Eurostat database Youth unemployment   213 caused a small immediate reaction; however, these strategies and policies have been much less effective (but for Germany) and the persistence of the impact is much higher The impact of the crisis on youth unemployment has been impressive YUR were in 2014 higher by half compared to 2007 values in the EU-28 (22.2 per cent versus 15.6 per cent). Some countries exhibit exceptionally high values in 2014, including Greece (52.4 per cent), Spain (55.2 per cent), Croatia (45.5 per cent), and Italy (42.7 per cent) Also, the NEET rate has increased in the EU: from 10.9 per cent in 2007 to 12.3 per cent in 2014; exceptionally high values can be found in Italy, where the NEET is above 22 per cent, Bulgaria (20 per cent), Greece and Croatia (about 19 per cent), Spain, Cyprus and Romania (17 per cent) Conclusions and policy implications As shown in the previous section with vast empirical evidence, a clear “disadvantage” of young people in the labour market emerged, with remarkable differences across the EU countries Thus, a new type of inequality refers to the relative position of different generations in the labour market (in terms of quantity and quality of job opportunities and as regards life-cycle income) While in most developed economies the “old generation” is continuously getting an increasing share of income, due to demographic (the “ageing” society) and institutional (public expenditure for old-age pensions, health, etc.) reasons, the currently “young generation” receives a thin slice of production and income The relative position of young people further worsened after the recent crises The key policy implications refer to both macroeconomic policies and specific policies for young people in the labour market At the first level, there is a need to: stimulate economic growth and, of course, to avoid financial crises Both suggestions are not trivial Economic growth should be sustained, especially in Europe, because austerity measures have been too profound As to financial crises, despite the numerous proposals at different levels (G-20, EU, individual countries) to reform the international financial systems, little progress has been made to date In particular, in the EU, in addition to indispensable changes in the institutional governance of the EU, economic policies should become more expansionary in order to stimulate economic growth in the short as well as in the long run.16 The fiscal rules (Fiscal Compact, Stability Pact, etc.) should be enforced in a more flexible way, otherwise the austerity measures compulsory for many countries at the same time contribute to the current stagnation situation Monetary policy since 2012 has been able to calm financial markets17 Unconventional monetary policy is even more important in this moment when deflationary conditions tend to prevail: the “quantitative easing” launched by the European Central Bank in March 2015 is a right move in this direction Of course, labour policies are also needed to reduce high unemployment and, especially, the high and rising YUR Generous active labour policies and a reform of unemployment benefits could help More specifically, age-targeted policies to tackle the YUR, including for example reforms of school-to-work institutions, may be more successful than a uniform policy New school-to-work transition institutions, should include innovative educational, placement and training schemes Generous active policies for the labour market should be integrated with the necessary passive labour market policies In particular, the need for effective active labour market policies aimed at preventing short-term unemployment from becoming structural or long-term The above mentioned policies can reduce the disadvantages of young people in the labour market, especially in the countries showing a high intergenerational inequality 214  Enrico Marelli and Marcello Signorelli Notes The lack of job stability is the most serious cause of lower satisfaction of temporary workers (see Bruno et al., 2014a, for an empirical investigation on the Italian case) The relationship between youth unemployment and social exclusion has been analysed by Hammer (2003) We refer to developed countries, while a different demographic situation tends to persist in less developed economies The different types of “disadvantage” can interact: for instance, Baussola and Mussida (2014) found for the Italian case that the disadvantage experienced by women in the labour market (i.e the “gender gap” in terms of employment opportunities) is particularly significant for young and low-educated women 5 This fact has attracted a number of empirical investigations (Freeman and Wise, 1982; Blanchflower and Freeman, 2000; Ryan, 2001; Quintini, Martin and Martin, 2007; Brada et al., 2014) In this respect, the characteristics of educational systems and the different processes of human capital formation are of particular importance For example, a dual educational system such as the one implemented in Germany where apprenticeship plays a key role together with formal education, is probably the best strategy to reduce the youth experience gap and improve the employability of young workers (Brunello et al 2007) See Caroleo and Pastore (2007), Quintini and Manfredi (2009) and Ryan (2001) For a recent account of labour market institutions see European Economic Advisory Group (2013) See Arpaia and Curci (2010), who produced a broad analysis of labour market adjustments in the EU-27 after the 2008–09 recession in terms of employment, unemployment, hours worked and wages 10 The greater impact on YUR has been found in the case of financial crises, in an empirical analysis including a long period (starting 1980) and a large sample of countries in the world: see Choudhry et al (2012) As for the joint impact of labour policies and the Great Recession on YUR, see Dal Bianco et al (2015) 11 The initiative “Youth on the Move” within the Europe 2020 programme of the EU (European Commission, 2010) emphasises the importance of focusing on the NEET problem 12 This was the worst year also for Greece and Spain, where TUR reached 58.3 per cent and 55.5 per cent respectively 13 As we shall see below, the high incidence of part-time work favours the high employment of young people, who frequently are students and workers at the same time 14 2004 is the initial year for which we dispose of Eurostat data 15 As for the effect of unemployment on poverty and inequality, see Saunders (2002) 16 As for the main reasons of the Eurozone crisis and on the necessary innovative institutional and economic policies, see Marelli and Signorelli (2016) 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growth in inequality due to 51 Australia 184 Bárcena-Martín, E 52 bargaining power of firms 35 Barro, R 157 Bazillier, R 51 Becker, G 176, 178, 192 Besley, T 78 Birdsall, N Boeri, T 190 Booth, A.L 183 Borjas, G.J 191–2 Bosch, Juan 86 Bowles, Samuel 77 Brazil: country size and population 91; current economic and political situation 92; Dominican Republic, comparison with 80–1, 81, 82, 83, 83; economic policies 84, 85–6; education 85, 88–9, 89, 91; GDP per capita 81, 81, 82; inflation 87; populism in 84; productive structures 81– 2, 82; redistribution efforts 85; structural change 87–8; technological capabilities 83 business elites, domination of 90 capabilities 152 Capital Markets Union 159 Cardoso, E.A 85 Caroleo, F.E 187, 188 Cazes, S 178 Central and Eastern European Countries (CEECs) 189–91 Central Human Capabilities (CHC) 152 Chile 73 Cho, Y 49 Choudhry, M.T 174 class: data and methodology 52–3; European financial crisis 50–2, 53–9, 55, 56, 57, 60, 61, 66–72; European Union Statistics on Income and Living Conditions (EUSILC) 52–3; household income, sources of 53 co-variation 78 collective bargaining, decline of 33–4 common v redistributive interests 78 compensation thesis 4, 103, 105, 107, 108–10 consumer demand as declining 31–2 countries, differences in inequality between 2–3 cross-country analysis of economic growth and inequality 2–3 Daintith, Terence 151 Denmark 182 developing countries, inequality as impeding growth 31, 31 Dietrich, H 182 dimensions of inequality, clarification of term 12 distribution of income: Brazil 85; continued focus on 11; defined 39; financial crisis 2008–9, impact of 51; inadequacy of focus on 13–15; inequity as beneficial for growth 24; literature on inequality 13; negative consequences of strong 38–9; personal/functional distribution 32–3; power to re-distribute resources 78; reasons against concern for 24–6; 218 Index redistribution measures 38–43, 39, 40, 41, 42; stability of factor shares 24–5; unequal, as growth block 77 Domadenik, P 189, 191 Dominican Republic: Brazil, comparison with 80–1, 81, 82, 83, 83; business elites, domination of 86–7, 90; current economic and political situation 92; economic policies 84–5, 86–7; education 89, 89–90; exports 83; GDP per capita 81, 81, 82; liberalization and structural adjustment 88; productive structures 81–2, 82; technological capabilities 83 Dowding, K 146 durable inequalities approach 148, 151–3 Durable Inequality (Tilly) 148 economic growth: and inequality 2–3; inequality as beneficial for 24, 30–1; Kuznets curve 2–3 economic inequality, distinguished from income inequality 13 education: Brazil 88–9, 89, 91; Dominican Republic 89, 89–90; higher education 88–9, 89, 187; income inequalities 32, 113–15, 124, 125, 126–7, 128, 129, 136–43; middle-income countries 78–9, 88–90, 89, 90; talent mobilization through 75–6; see also school-to-work transition efficiency thesis 4, 103, 107 elites, domination of 86–7, 90 employment: gender and financial crisis 2008–9 48–50, 49; income inequalities 36– 7; see also labour market; unemployment; youth unemployment employment protection legislation 114–15, 120, 121, 127, 128, 129, 130, 136–43, 199 Engerman, S entrepreneurship in the European Union 152 equity, tradeoff with growth 24, 30–1 Espinal, R 88 Esping-Anderson, G 105 European financial crisis: class and inequality 50–2; class during 53–9, 55, 56, 57, 60, 61, 66–72; data and methodology 52–3; distributional impact of 51; European Union Statistics on Income and Living Conditions (EU-SILC) 52–3; and gender 48–50, 49; gender during 53–9, 54, 55, 56, 57, 58, 59; and youth unemployment 174, 198, 209–10 European Fund for Strategic Investments 159 European Union: benchmarks 150; categories, use of 149; Central Human Capabilities (CHC) 152; convergence, measuring 147; deontological approaches 147–8, 153; durable inequalities approach 148, 151–3; entrepreneurship 152; Europe 2020 145; individuals, focus on 149; interventions concerning inequalities 145; judiciability of rights 151; justification of interventions 146–9, 153; Lisbon Agenda 145, 149–51; new EU states 189–91; Open Method of Coordination 152; political economy 149–53; property, legal meaning of 151; representation processes 152; representing inequalities in 144–5; rights-based approaches 149–53, 153–4; small businesses 152; social choice 146–7, 153; social indicators 150, 152–3; Social Question 145; utilitarians 146–7, 153; welfare economics 147; see also school-to-work transition; technological disparities in EU regions; youth unemployment European Union Statistics on Income and Living Conditions (EU-SILC) 52–3, 115–16 factor shares, stability of 24–5 fairness 26–7, 29–30 family networks 186 Fan, P 164 Feenstra, R.C 105 Felipe, J 80 Fernández-Arias, E 88, 89 Ferrera, M 148 financial capitalism 3–4 financial crisis 2008–9: class and inequality 50–2; class during 53–9, 55, 56, 57, 60, 61, 66–72; data and methodology 52–3; distributional impact of 51; European Union Statistics on Income and Living Conditions (EU-SILC) 52–3; and gender 48–50, 49; gender during 53–9, 54, 58, 59, 60, 61; and youth unemployment 174, 198, 209–10 financial instability 32 financialization, rise of 34 firms: bargaining power of 35; monopolistic 35, 36 fixed-term contracts 178 flexibility in the labour market 33, 171, 177–9, 183–4, 186, 191–2 foreign direct investment (FDI) 102, 103 Framework Programme for Research and Technological Development (FP) 159 Francesconi, M 183 Frank, J 183 functional income distribution: and class 51; and personal distribution 32–3 Furtado, Celso 85 Galbraith, John K 11 gender: austerity, impacts of 50; data and methodology 52–3; European financial crisis 48–50, 49, 53–9, 54, 55, 56, 57, 58, 59, 60, Index 219 61, 66–72; European Union Statistics on Income and Living Conditions (EU-SILC) 52–3; household income, sources of 53; school-to-work transition 188–9; youth unemployment 204 Germany 182–3 Giambiagi, F 84 globalisation: bargaining position of labour and capital 105; causes of 100–1; compensation thesis 103, 105, 107, 108–10; definitions of 99; efficiency thesis 103, 107; foreign direct investment (FDI) 102, 103; income inequalities 34–5, 37; inequalities as consequence of 102; intensification of 99–100, 100; model following compensation thesis 108–10, 109; neoclassical approach 101–2; openness of economies 101–2; R&D investment 102; tariffs 102; trade intensification 101; welfare models 105, 105–7, 106, 107; and welfare state 103, 105; welfare state, need for 101–2 Gollin, D 22 growth, inequality as beneficial for 24, 30–1 Hay, C 99, 105 health, and income inequalities 32 Heckman, J.J 191–2 Heidenreich, M 150 Hein, E 51 Helwege, A 85 Héricourt, J 51 higher education: Brazil 88–9, 89; Italy 187 “Horizon 2020” 159 household income: and gender 53–9; sources of 53, 53–4, 55, 66–72 human capital; see education income distribution; see distribution of income income inequalities: 2007–2011 hourly wages 116, 118, 119; absolute level of income of the poor 26; bargaining power of firms 35; as beneficial for growth 24; causes of 32–5, 33, 34; collective bargaining 33–4, 37; data used for analysis 115–16; defined 22–4; demand, shrinking of 31–2; disproportion with wealth inequality 42, 42; distinguished from economic inequality 13; econometric methods of analysis 122–4; educational levels 113–15, 117, 124, 125, 126–7, 128, 129, 136–43; empirical model for EU countries 123–4; employment protection legislation 114–15, 120, 121, 127, 128, 129, 130, 136–43; employment rate and quality of 36–7; European Union Statistics on Income and Living Conditions (EU- SILC) 115–16; fairness 26–7, 29–30; financial crisis 2008–9 50–2; financial instability 32; financialization, rise of 34, 36; globalisation 34–5, 37; health and education 32; hourly wages across countries 116, 117; as impeding growth 31, 31–2; income defined 115–16; increases in 26, 27, 28; labour market institutions 113–15, 120, 121; labour market policy 33, 37; monopolistic firms 35, 36; negative consequences of 27, 28, 28–30, 29, 30; neoliberalism, move towards 33; personal/ functional distribution 32–3; policy suggestions to counter 35–8; prevention of 36–8; production costs 37; reasons against concern for 24–6; reasons for concern about 26–7, 27, 28, 29, 29–32, 30, 31; recessive macroeconomic policy 33; redistribution measures 38–43, 39, 40, 41, 42; regular/temporary work wage gap 116– 17, 118, 119, 120, 121, 124–7, 125, 128, 129, 130, 131, 135, 136–43; routinisation hypothesis 114; social cohesion, lowering of 29, 29–30; social indicators 30, 30; social mobility, reduction of 27; stability of factor shares 24–5; technological change 35; temporary/regular work wage gap 115, 116–7, 118, 119, 120, 121, 124–7, 125, 128, 129, 131, 135, 136–43; trade unions 33, 33–4, 34, 37; wealth, concentration of 32; youth earnings compared to mature workers 209, 212 inequality: as bad for productivity 77; as beneficial for growth 24; as impeding growth 31, 31–2 inflation 87 infrastructure in middle-income countries 79–80 innovation: middle-income countries 79; see also technological disparities in EU regions Innovation Union 159 Innovation Union Scoreboard 158 instability, financial 32 institutional explanation for inequality 2–3 institutional variables 78 institutions, inclusive/extractive 77 intergenerational elasticity 27, 28, 29 international trade; see globalisation Ireland 185 Italy 187–8 Kaldor, N 24 Karamessini, M 50 Kubitschek, Juscelino 85 Kuznets, S Kuznets curve 2–3, 26 220 Index labour market: active labour market policy 180–2, 186, 188; employment protection legislation 114–15, 127, 128, 129, 130, 136–43, 199; under financial capitalism 3; flexibility in 177–9, 183–4, 186, 191–2; institutions of, and income inequalities 113–15, 120, 121; policy, and income inequalities 33, 37; policy, regulation of 37; see also employment; unemployment; youth unemployment Lankly, S 32 Latin America, inequalities in legislation, employment protection 114–15, 127, 128, 129, 130, 136–43, 199 Lisbon Agenda 145, 149–51 Lucas, R 102 McKay, A 50 macroeconomic policy, recessive 33 Maitre, B 150 Marelli, E 174 Martin, P 165 Marx, I 43 Marx, Karl 14, 25–6 measurement of inequality 12 men; see gender metrics of inequality 12 middle-income countries: Brazil 81, 81, 82, 83, 83–4, 88–9, 89, 91–2; business elites, domination of 86–7, 90; Chile 73; co-variation 78; common v redistributive interests 78; country size and population 91; current economic and political situation 92; Dominican Republic 80–1, 81, 82, 83, 83, 84–5, 86–7, 88, 89, 89–90, 91, 92; economic policies 84–8; education 75–6, 78–9, 88–90, 89, 90; elites, actions of 80; fragmentation of private sector interests 91; GDP per capita 81, 81, 82; inclusive/extractive institutions 77; inflation 87; infrastructure in 79–80; innovation 79; institutional level 78–9, 80; middle-income trap 73, 75–6, 90; policy level 79–80; political economy perspective 74, 74, 76, 76–80, 77; power to re-distribute resources 78; productive structures 81–2, 82; South Korea 73; structural change 87–8; talent mobilization 75–6; technological capabilities 83; transition to high-income status, problems with 73, 89–90 Milanovic, B 3, 11, 12 Milkman, R 48 monopolistic firms 35, 36 Moro-Egido, A.I 52 multidimensional inequality: clarification of term 12; complexity of 15, 16, 17–18 multiscale inequality: clarification of terms 12; complexity of 15, 16, 17–18 neoliberalism, move towards 33 Nesporova, A 178 Newell, A 174 Newhouse, D 49 North, D.C 78 North America, inequalities in Nussbaum, M 152 Open Method of Coordination 152 Paas, T 163–4 Palley, T 51 part-time work, youth in 208–9 Pastore, F 174, 184, 187, 188, 189 patenting activity 166 Périvier, H 50 personal/functional income distribution 32–3 Persson, T 78 Pigou, A 30 Piketty, T 2–3 Poland 190–1 policy: income inequalities 35–8; middleincome countries 79–80; youth unemployment 213 political economy perspective on middleincome countries 76, 76–80, 77 political (in)stability and inequality political violence 78 power to re-distribute resources 78 predatory behaviour of the rich 35, 37–8 production costs 37 productivity, inequality as bad for 77 Rawls, J rebellions and inequality redistributive v common interests 78 regional inequalities; see technological disparities in EU regions Regional Union Scoreboard 158 research and development, investment in 102; see also technological disparities in EU regions Ricardo, D 25 rights-based approaches in the EU 149–53–4 Robinson, J.A 76–7, 80 Rodrik, D 101–2 Roncaglia, A 14–15 routinisation hypothesis 114 Rubery, J 50 Ryan, P 183 Sabot, R Sala-i-Martin, X 157 Samuelson, P.A 102 Index 221 Sánchez, M.E 90 Sánchez-Ancochea, D 86 Sawyer, M.C 12 Schlenker, E 51 Schmid, K 51 Schneider, B.R 80 school-to-work transition: active labour market policy 180–2, 186, 188; AngloSaxon system 183–5, 184; Australia 184; continental-European system 182–3; Denmark 182; differences between systems 179–80; dual educational system 182–3; educational systems 179, 184–5, 186–8, 191, 192; flexibility in the labour market 171, 177–9, 183–4, 183–5, 186, 191–2; gender 188–9; Germany 182–3; improving 192; informal recruitment 186; Ireland 185; Italy 187–8; as key to youth unemployment 171; new EU states 189–91; North-European system 180–2; Poland 190–1; policy instruments 176–9; social mobility 187–8; South European system 185–9; Sweden 181–2; United Kingdom 184, 185; United States 183 Sen, A 2, 13, 14, 15, 17, 152 Senderowitsch, R 90 SF Convergence objective (CON) 159 short-term contracts 178 Signorelli, M 50, 174 Singer, B 191–2 small businesses in the European Union 152 social choice 146–7 social cohesion, lowering of 29, 29–30 social indicators 30, 30 social mobility: Italy 187–8; reduction of 27, 28, 29 social peace and cohesion social welfare: as basis of inequality 1–2; as cost to be suppressed 4; see also welfare state Solokoff, K Soskice, D 80 South America, inequalities in South Korea 73 stability of factor shares 24–5 Steedman, H 182 Stewart, F 12 Stockhammer, E 51 Stolper, W.F 102 Structural Funds (SF) 159 Summers, L.H 35 Swedish labour market 181–2 talent mobilization through education 75–6 tariffs 102 tax; see distribution of income technological change 35 technological disparities in EU regions: bridging the gaps 167; Capital Markets Union 159; European Fund for Strategic Investments 159; Framework Programme for Research and Technological Development (FP) 159; and GDP 163–5, 164, 166, 167, 167; Horizon 2020 159; illustration of 160, 160–1, 161, 162, 163, 163, 163; Innovation Union 159; Innovation Union Scoreboard 158; and other disparities 163–6, 164, 165, 165, 166, 167; patenting activity 166; policy 158–9; SF Convergence objective (CON) 159; Structural Funds (SF) 159; and unemployment 164, 165, 167 temporary work: and regular work, wage gap between 115, 116–7, 118, 119, 120, 121, 124–7, 125, 128, 129, 131, 135, 136–43; and youth unemployment 178, 183, 208, 210–11 Todorova, Z 51 Torvik, R 76 trade unions: decline of 33, 33–4, 34; international cooperation between 37; school-to-work transition 180, 182, 183, 186; social partnership with 37 training; see school-to-work transition Trujillo, Rafael Leónidas 84 trust relationships, decrease in 29, 29–30 underconsumption 31–2 unemployment: income inequalities 36–7; and technological disparities in EU regions 164, 165, 167; see also employment; labour market; youth unemployment unions: decline of 33, 33–4, 34; international cooperation between 37; school-to-work transition 180, 182, 183; social partnership with 37 United Kingdom 184, 185 United States 183 utilitarians 146–7 Vahi, T 163–4 Vargas, Getúlio 84 Verbist, G 43 Voitchovsky, S wages: 2007–2011 hourly wages 116, 118, 119; devaluation of 33; globalisation, pressure on through 35; hourly wages across countries 116; temporary/regular work wage gap 116–7, 118, 119, 120, 121, 124–7, 125, 128, 129, 130, 131, 135, 136–43; youth earnings compared to mature workers 209, 212; see also income inequalities 222 Index Wallis, J.J 78 Walsh, P 102 wealth: concentration of 32; disproportion with income inequality 42, 42; predatory behaviour of the rich 35, 37–8; taxes on 41–2 wealth distribution; see distribution of income Weingast, B.R 78 Weishaupt, J.T 184 welfare state: active labour market policy 180–1; as basis of inequality 1–2; Central and Eastern European Countries (CEECs) 189–91; as cost to be suppressed 4; and globalisation 103, 105; and inequality 110; need for, globalisation and 101–2; welfare models 105, 105–7, 106, 107 Whelan, C 102, 150 Wincott, D 99, 105 women; see gender Wright, Olin 149 Wunder, C 150 youth unemployment: causes of 198–9; earnings compared to mature workers 209, 212; educational systems 179; employment protection legislation 199; employment rate 202, 204, 205; in Europe 199, 200–1, 202, 203, 204, 205, 206–7, 208–9, 210–11, 212, 213; experience gap 170–1, 176–9, 198–9; financial crises, impact of 174, 198, 209–10; flexibility in the labour market 171, 177–9; gender 204; impacts of 197–9; institutional variables 199; long-term 204, 208; NEET indicator 199, 204, 206–7; new EU states 189–91; part-time work 208–9; persistence of over time 199; policy implications 213; policy instruments 176–9; policy interventions 170–2; short/fixed-term contracts 178; stylised facts 170, 172–6, 173, 175, 176, 177; temporary work 178, 208, 210–11; and total unemployment rates 198, 200–1, 202, 203; see also employment; labour market; school-to-work transition; unemployment ... Fadda is Professor in the Department of Economics, Roma Tre University, Italy He teaches advanced labour economics, and economic growth Pasquale Tridico is Professor in the Department of Economics, ... Management, London Contents List of figures List of tables List of contributors Acknowledgements Introduction: bridging theories and evidences of varieties of inequality ix xi xii xiii S ebastiano... and other types of analyses that reveal structural inequality within the society The very foundation of the problem of inequality, from an economic point of view, is the concept of social welfare