Do an income and poverty gaps exist between rural and non-rural areas in Europe?

This paper aims to address the issues of the so-called "rural effect", which imputes the disparities in income between those who live in rural areas and those in urban areas. Differences in poverty rates, or more broadly, the living conditions of households, are influenced not only by the individual characteristics of residents, conceptualised as levels of human capital, but also significantly shaped by the structural attributes of their place of residence (Bernard, 2019). While the existence of the rural effect has been demonstrated in numerous developing countries, its applicability in Europe remains uncertain. Using the Kitagawa-Oaxaca-Blinder decomposition on the EU-SILC panel data wave (2017-2021) covering 25 European countries, this paper investigates whether the evidence supports the existence and the possible characteristics that affect this effect in the Member States. To our knowledge, tackling the income and poverty gaps between rural and non-rural areas at the same time in the EU using this approach has not been attempted before. Although poverty trends are diminishing overall, rural areas remain at greater risk. Higher education and employment consistently reduce the probability of poverty, underscoring the importance of targeted investment in human capital and labour inclusion.