Inequality Implications of EMU Membership: A Reassessment

A growing number of studies have concluded that the European Economic and Monetary Union (EMU) has exacerbated inequalities in income, wealth and society. Furthermore, the endogeneity of income inequality is now becoming recognised as an important part of the cost-benefit analysis of euro currency adoption. Yet the nature, significance and scale of different monetary (and market) integration channels in operation in EMU remain uncertain. In this contribution we employ static and dynamic panel data methodologies to investigate the intra-national household inequality implications, both realised and expected over coming years. Our analysis reveals that the within-country inequality outcomes differ significantly for core and non-core country-groups in EMU, which have so far realised very different distributional costs and benefits from the integration process. These are crucial issues for policy-makers, not just for EMU member states, but for other countries as well, especially the European Union (EU) countries that are expected to adopt the euro currency in the future. This is so in terms of their attempts to look for, design and implement policies, which alleviate within-country inequality.