The evolution of economic inequality in the EU countries during the nineties: A new methodological approach

In the typical study comparing the evolution of economic inequality among different territorial units, an inequality indicator is chosen, and its value is calculated from sample data. Thus, the problem turns out to be the selection of the inequality indicator. This paper shows that there is no need for a selection of a single inequality indicator. A whole set of inequality indicators are considered and calculated for the European Countries, using income data from European Community Household Panel (ECHP). The information they provide is then collapsed into a composite inequality indicator, through an adaptation of Principal Component Analysis (PCA). We analyze the conditions needed to make longitudinal comparisons possible. Results obtained with this composite indicator are used to compare and analyze the trends in economic inequality in the EU Countries.