Elements of household income and income inequality in selected EU countries

Aim: The aim of this study was to identify the most influential factors impacting thelevel and dynamicsof general income inequalities in Poland, Denmark, Germany, Spain and Romania in the period 2007-2019.
Methodology:The study was based on unpublishedindividual data from the EuropeanSurvey of Income andLiving Conditions carried out by the European Commission. The research was conductedusing the procedure of decomposing the Gini coefficient to the general assessment of inequalities as per income source
Results: The study enabled the conclusion that the biggest inequalities in household gross incomewere present in Romania, and the smallest in Denmark. In Romania and Poland income inequalitiesare slowly but continuously rising, whilst in Denmark, Spain and Germany, they are in decline. Thegross income in the analysedEU households was based on three main elements, namely paidemployment, self-employment and pensions, which constituted 86-96% of household financialresources. Thediversity of inequality was predominantly influenced by the income from paidemployment, interests,dividends and profit from capital investments in unincorporated businesses, self-employment as well as old-age benefits; such benefits showed an equalising effect on incomeinequalities.
Implications and recommendations: Analyses carried out on the basis of microdata can contribute to the formulation of policies, the targeting of interventions, and the monitoring and measurement of the impact of ongoing interventions and policies on the situation of households.
Originality/value: This study contributes to the literature on income inequality byprovidinga comparative analysis of five European countries, By utilizing unpublished microdata from theEuropeanSurvey of Income andLiving Conditions(EU-SILC), this research offers a novel approach to identifying the distinct contributions of employment income, self-employment, capital income, andpensions to inequalitylevels. The study's cross-country comparisoncovering the period 2007-2019alsoprovidesvaluable insights into the heterogeneous impacts of socioeconomic policies across bothWestern and Eastern European countries. This original dataset and analytical approach support thedevelopment of moreeffective,evidence-based public policies aimed at reducing income disparities.