European Integration and Income Inequality: Evidence from the 2004 EU Enlargement

Sammanfattning

This study examines how the 2004 European Union enlargement is associated with income inequality in the nine new member states (Cyprus, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia). Using panel data covering the period 1996–2023, the analysis applies a before–after empirical framework to investigate whether income inequality changed following EU accession and whether trade openness, institutional quality, and technological progress are associated with these changes. The analysis includes country fixed effects, common linear time trends, and sensitivity analyses designed to assess whether the observed differences can be linked specifically to the 2004 enlargement. Income inequality is primarily measured using the disposable-income Gini coefficient, complemented by the P90/P10 ratio as an alternative inequality measure.The results indicate that income inequality was higher during the post-2004 period than during the pre-accession period in the pre-accession period in the EUnew countries. However, the sensitivity analyses suggest that the observed differences cannot be clearly attributed to the 2004 enlargement, as similar patterns emerge when alternative post-period definitions are used. To understand the possible reasons behind the increase in income inequality, the study examines trade openness, institutional quality, and technological progress separately. Institutional quality and technological progress are higher in the post-accession period, while the relationship between trade openness and the post-accession period becomes statistically insignificant once common linear trends are included. None of the mechanism variables are statistically significantly associated with income inequality. Overall, the findings suggest that the observed differences between the pre- and post-accession periods are better interpreted as descriptive associations than as evidence of a distinct effect of EU enlargement.