Abstract:

At least three of the five headline goals of the Europe 2020 strategy for smart, sustainable and inclusive growth – the employment rate (75% for 20-64 year olds), education (reducing the rates of early school leaving below 10% and increasing at least 40% of 30-34 year olds completing third level) and the poverty targets (lifting 20 million people out of poverty) – relate directly to education and income inequality. As well known, since 2008 Europe, although with different intensity across countries, entered into economic downturn and still ongoing. Therefore, it would be worth considering whether the narrowing of inequalities is actually feasible, especially in countries whose territorial disparities in education and income are continually growing and labour market characteristics are unequally distributed over different sub-groups of population.

The paper examines the role of the interaction between labour market opportunities and personal education in explaining differences in generating individual earnings and their effects on income inequality. The analysis, drawn upon the EU-SILC data, involves four economies of Southern Europe – Greece, Italy, Portugal and Spain – which have hardly felt the damaging effects of the global crisis with a significant widening of the pre-existing regional disparities.

However, because of different macroeconomic conditions, institutional settings and policy framework, each country has differently reacted. Greece has suffered a pronounced throwback as direct consequence of the crisis more than any other country so that structural reforms are required in order to ensure the achievement of these targets. In Italy, which has seen its real GDP back to levels of the start of 2000s, the low productive investments and the high long-term unemployment rates have negatively affected even the matching in the labour market. The cyclical deterioration impinged upon well-known structural weaknesses has given rise to the proliferation of atypical and flexible forms of work, higher shares of temporary contracts and irregular jobs. In Spain and Portugal, social and economic indicators have seen a drastic decline with very poor performance of labour market and worsened macroeconomic imbalances.

In a methodological perspective, the paper is structured in two steps. In the first one, the potential of EU-SILC balanced micro panel is exploited by random effects models, which also permit controlling for individual heterogeneity, that is, the variability across individuals (between) and the variability over time (within). In the second step, the ANOGI (Analysis of Gini) decomposition is performed in order to evaluate the contribution of each sub-population (e.g., groups of individuals with different formal education) – taking into account the evolution of their characteristics (e.g., changes in employment status, type of contract, etc.) – to the overall income inequality and to assess the degree to which each sub-group of population is stratified.

This may be a relevant matter for identifying, in a cross-country perspective, potential weaknesses of each educational and labor market system that could give insights in the debate between the European and national levels on policy developments for designing the core conditions of effective measures in fighting the causes behind the education and income inequality and transform them in opportunities.

Keywords:

Human Capital, Panel Data, ANOGI, Cross-Country Comparison.