Factors related to the depth of the latest crisis for EU-27 countries: The key role of relative inequality/poverty

In this paper we investigate the relationship between the intensity of the recent global economic crisis and the current economic position of EU countries on the one hand and relative poverty and/or inequality on the other. Using data from the 27 EU member states we find a link between economic distress during and after the crisis and the degree of inequality/poverty in each country. The results show a strong positive relationship between the size of the economic crisis impact and higher inequality/poverty at the national level. We also find that these indices are more strongly correlated with the crisis variables, compared to four other well known and widely used indices.

► More equal European countries performed better during the recent economic crisis. ► Inequality/poverty provide superior correlations with the crisis predictors. ► Inequality/poverty dominate the other variables in regression analysis. ► Competitiveness performs better than GDP in correlations with crisis predictors. ► HDI outperforms GDP and competitiveness in correlations with the crisis variables.