Mapping Regional Personal Income Distribution in Western Europe: Income Per Capita and Inequality

Past studies of regional economic disparities in the EU are fundamentally based on the information provided by macroeconomic variables. This paper considers regional disparities using microeconomic data aggregated at the regional level, paying attention not only to the average, but also to the inequality levels of individual incomes within regions. It maps regional personal income distribution in Western Europe, using data from the European Community Household Panel (ECHP) data survey covering more than 100,000 individuals, for 102 regions, and over the period 1995–2000. The Exploratory Spatial Data Analysis on income per capita and inequality reveals a rich set of findings. (1) There is a strong U-shaped relationship between income per capita and inequality which is highly robust across inequality measurements. (2) 80 percent of the income inequality in Europe takes place among individuals living in the same region. (3) Regions with similar income conditions tend to cluster, not only within national borders, but also across nations. (4) There is a North-South and an urban-rural divide where northern regions and city-regions have the highest economic development, as well as the lowest levels of inequality.