Measurement and methodology

The analysis is based on data from the 2009 EU-SILC. The income measure used in the analysis is yearly household disposable income, equivalised to adjust for differences in household size and composition using the modified OECD scale (the income reference year is 2008).

To make income in the different countries comparable in terms of purchasing power, it is adjusted to take account of price level differences between countries as expressed in PPS (purchasing power standard) estimates. It is important to keep in mind that these estimates are based on an average basket of goods and services consumed by households, and that this might differ from that consumed by households towards the top or the bottom of the income scale. Non-positive income values – which in part result from the way in which the income of the self-employed is defined (i.e. essentially in terms of net trading profits) and in part from cases where the taxes paid in a particular year exceedgross income – are excluded from the analysis.

The mean log deviation (MLD) measure is used for the decomposition analysis because it is additive, i.e. the inequality between countries and the inequality within countries can be summed to give the overall inequality.