The Relation Between Income Inequality, Education and Social Structure: Panel Data Analysis of the European Union

In the last 30 years, income inequality has increased in almost all OECD countries. The purpose of this thesis is to examine the relation between income inequality, education and social structure in the European Union, using the statistics from Eurostat and the OECD. This is researched by using three inequality measures: the Gini coefficient, the Theil index and the Mean Log Deviation. Old age dependency, country of birth and mortality rates are all covered by social structure. The conclusion when using a pooled model is that all these factors do indeed influence income inequality either positive or negative. The fixed effects model concludes that only old age dependency and education influence income inequality. Furthermore, the correlation between the inequality measures is examined. It is concluded that these measures have a very strong correlation.