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Mitigating the Inequality Crisis

  • Guillaume Allègre
Chapter

Abstract

Whereas inequality has been increasing in all world regions, the European Union (EU) is the region where inequalities have been kept the lowest. After discussing the social and economic cost of inequality, we review in this chapter the factors contributing to the rise of inequalities in developed countries (technological change, globalization, the decline of trade unions). Then, we show that European countries are heterogeneous in their level of within-country inequality due to differences in labour market institutions, which determine wage inequalities, and differences in the redistribution operated by the tax and benefit system. As for between-country inequality, we show that there has been convergence, but limited to the lowest-income countries. Overall, global inequality in the EU—measured between European citizens—is at the same level as in the United States. We also show that tax competition over mobile tax bases puts pressure on the progressivity of the overall tax system. In order to keep inequalities low, the EU needs to tackle tax competition, notably by introducing minimum tax rates on corporate income; it also needs to put an end to low wage growth strategies through a coordination of national wage policies.

Keywords

Inequality Redistribution Welfare regime Convergence Tax competition 

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Copyright information

© The Author(s) 2018

Authors and Affiliations

  1. 1.OFCE, Sciences PoParisFrance

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