Growth and Income Distributions in Four EU Economies

Dynamic multi-sectoral and multi-household general equilibrium models are constructed to show how the economies of Germany, France, Spain and the United Kingdom will evolve from 2006 to 2090. These models generate dynamic paths of investment and capital accumulations, demand and supply across production sectors, consumption and welfare of households, relative prices of goods and services, revenue and expenditure of governments, exports, imports, and trade balance consistent with the dynamic general equilibrium in these economies. The models show that inequalities in income distribution among households will not decrease but widen if the current mix of direct and indirect taxes continues in all four countries. Growing inequalities in these economies justify further investments in education and skills.