The evolution of inequality of opportunity in Europe

This paper analyses the effect of inherited individual circumstances such as gender, family background, foreign background and health status, on individual earnings in the EU. By using three waves of the EU Statistics on Income and Living Conditions (2005, 2011, 2019) this study documents the extent, evolution, and sources of inequality of opportunity in earnings across 27 EU countries. The analysis is carried out both at the country level and at the pan-EU level, treating the European Union as a single entity and considering the EU country of origin as an additional individual circumstance. The cross-country analysis reveals that, on average, approximately 40% of earnings inequality is explained by pre-determined individual circumstances, although with pronounced differences across countries, both in terms of levels and trends. Gender and parental education emerge as the most relevant individual circumstances in most countries. Pan-European inequality of opportunity, estimated through a multilevel model, appears to be much higher than any other country specific estimates. In 2019, about 60% of EU earnings inequality was explained by individual circumstances, despite a clearly decreasing trend in the last 15 years. Inequality in EU earnings explained by differences between countries declined by over 50% in 2019 compared to 2005, indicating a significant process of convergence within Europe that has reduced the role of country of origin in determining individual earnings at the EU level.