The Evolution of Income Distribution and Disability in Europe

We investigate how disability affects income distribution and how this has evolved in Europe, using 2005-2008 and 2015-2018 European Union Statistics for Income and Living Conditions data. We model both income and disability processes in a dynamic way, allowing for the possible role of past income in determining disability. Our findings suggest the decade explored has been characterized by a slight strengthening of income polar-ization and lower income mobility. However, income inequality evolved differently by disability group: it increased for non-disabled, and decreased for people with severe disabilities and their households. For this latter, our results suggest this evolution can be explained by a worsening of overall income conditions, with greater persistence in poverty, lower persistence in richness, and a higher probability of moving from high to low-income positions. In this respect, increasing social expenditure for disability may be important for the mitigation of such detrimental effects.