Inequality, growth and mobility: The intertemporal distribution of income in European countries 2003–2007

This paper exploits EU Statistics on Income and Living Conditions longitudinal data 2003–2007 to describe the intertemporal distribution of income in twenty-six European countries prior to the onset of the Great Recession. We document levels, inequality and progressivity in the distribution of year-on-year income gains and losses and examine the relationship of these with inequality and poverty indicators. New Member States have typically seen individual incomes grow faster than other EU countries. Income gains were disproportionately pro-poor in all countries. We therefore observe regression to the mean both among EU countries and among individuals within countries. However, short-run income mobility does not significantly reduce inequality of time-averaged incomes. Potential issues about cross-country comparability of the data and the short period under consideration call for caution in interpreting our results, however.