ABSTRACT
This chapter goes beyond the core-periphery divide to consider the socio-economic divisions within the core and the peripheral countries. It looks specifically at the relation between income distribution and imports as an example of how social and economic developments retroacted on the core-periphery relations. The chapter focuses on the formation, in Germany, of a dualistic labour market, which resulted in an increasing share of the German population living in poverty. The increasing fragmentation of the periphery corresponds to a worsening of the regional divide within each single country. Inequality had been on the rise in the Southern European countries long before the crisis: labour market reforms led to a polarization of the labour market that the lack of a universal safety net made socially unbearable. The abandonment of the industrial policy in favour of a market-oriented agenda and the differential impact of the 2008 crisis caused the enlargement of the gap.
