THE BETWEEN-COUNTRY INEQUALITY: DOES IT HINDER THE COMPETITIVENESS?

Abstract

Nowadays the competitiveness is the significant premise to enhance the inhabitants well being. From this perspective on competitiveness has been given great attention in the literature and competitiveness hindrances have been studied as well. However the link between inequality and competitiveness is less studied, particular in case of the European Union. Thereby the author attempts to clarify the role of the between-country income inequality in hindering the competitiveness.
The data analysis shows that lower income countries have less ability towards strengthening the nation economy competitiveness thereby reducing overall European Union competitiveness level. Obviously the country's competitiveness success degree is determined by the country's income level. Higher income gives comparative advantage for nation to invest in the science, research and development thereby improving competitiveness. On the one hand between-country inequality provides competitive advantage for some countries against other. On the other hand inequality reduces the European Union competitiveness in the global market.
The other findings show a slow convergence of income inequality between European Union countries over the time period from 2006 till 2010. People’s welfare characterized by GDP per capita has improved in almost all European Union countries, particular in transition countries, while between-country inequality has not changed significantly and is still relatively high.

DOI: http://dx.doi.org/10.5755/j01.em.17.1.2261