Economics and Policies of an Enlarged Europe
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Economics and Policies of an Enlarged Europe

Carlo Altomonte and Mario Nava

Carlo Altomonte and Mario Nava have written a very rigorous text in an accessible and jargon-free style, ensuring easy acquisition of invaluable insights into the European economic set-up and the possible evolution of EU policies, including an update on the reform of the Growth and Stability Pact and of the 2007–13 Financial Perspectives.
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Chapter 8: Policies for Cohesion and Sustainable Growth

Carlo Altomonte and Mario Nava


8.1 INTRODUCTION In the first chapter of this book we stated that Europeans tend to reject growth as a single objective; rather they aim at a model of economic development which tries to achieve the highest possible growth compatible with its sustainability over time (stability) and its equalitarian distribution, a goal that we have referred to as cohesion.1 By and large, the latter concept is associated with a low degree of inequality in the distribution of income across a society. In this regard, we have already shown in Chapter 1 that total inequality in the distribution of income can be decomposed into across-countries inequality and within-country inequality. Moreover, in Chapter 5, we showed that, for the EU case, across-countries inequality decreased until the mid-1990s, and now it is only a fraction of withincountry inequality, which alone drives around 90 per cent of the total inequality in the EU. We have however suggested that the latter inequality is very low if compared to the situation of other countries in the world. Hence prima facie evidence would indicate that the EU is a very cohesive society, a society characterised by a relatively low level of both acrosscountry and within-country inequalities. Still in Chapter 5, we also pointed out that the total degree of inequality in EU-25 is bound to increase, overtaking for the first time that of the USA, essentially on account of the relevant increase in the across-countries inequality brought in by the new, significantly poorer, member states. As a...

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