Financial stability reports : effectiveness as a warning tool building a paradigm of resilience and stability

Abstract

This dissertation attempts to investigate the movements in income distribution whilst identifying several contributors that impact inequality and pinpoint their corresponding effects towards the level of income inequality. Contributors of income inequality are outlined within theoretical expositions which are brought forward throughout the literature review. Moreover, stylised facts on European countries regarding the recent income distribution position is further delved into so as to shed light on the existing realities regarding such topic. Furthermore, an empirical analysis is used to examine income distribution on a broader level. To conduct such analysis panel data is used, thus combining the European Union 27 member states against a 7-year time period, 2005 - 2011; total observations adding up to 1,476. The Fixed Effect Model is found to be appropriate for the purpose of the regression estimation. Although restricted by the limitations of the model used, the major findings of such study are mainly that the wage share, education and labour market dynamics have significant impacts upon the determination of the income distribution. Additionally, recommendations regarding policy implications suggest that the emphasis should be put upon mostly education and labour dynamics, as such concepts resulted to greatly influence the state of income distribution.