Long-Term Tendencies in the Shares of Total Household Income Flowing to Upper and Lower Quantiles of European Households

Using national household income shares for deciles of household of countries belonging to the European Union, and their corresponding per capita GDP, projections of the share of the total household income flowing to the richest (top 20) quintile and the poorest (bottom 40) quintiles were projected based on the income distribution trends that were prevailing from 2003 to 2011. The decile data are the published estimates made by Eurostat from the EU-SILC survey and the per capita data are estimates made by the United Nations Statistical Office. The projections model is based upon the World Bank model developed by Ahluwalia, Carter and Chenery in 1979. That model was in turn based on the Kuznets’ hypothesis (1955) which postulated that income equality and socio/economic development have a quadratic relationship. The purpose of the exercise was to ascertain whether the shares between the richest and the poorest quintiles are diverging or converging. Our results for the European Union indicate that they are slightly converging, but at least there is no indication that they are diverging.