European Monetary Union and Inequality: A Synthetic Control Approach

By Florentin Kerschbaumer, Andreas Maschke

PKES Working Paper 2024

December 2020

The promise of greater material prosperity and economic convergence has underpinned the process of European economic integration. Its consequences for income inequalities within countries, however, have so far been little discussed. This paper seeks to contribute to the literature by investigating the effects of European economic integration on intra-country income inequality using the synthetic control method. We find that EMU, out of our sample of eight euro countries, has significant effects on inequality in Germany and Spain. From the several theories outlined in the literature, our results lend most support to the growth regime mechanism.

Keywords: Income Inequality, European Monetary Union, Synthetic Control Method

JEL classification: D63 N10 N14 P16