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Why is Income Inequality so High in Spain?

Income Inequality Around the World

ISBN: 978-1-78560-944-2, eISBN: 978-1-78560-943-5

ISSN: 0147-9121

Publication date: 27 August 2016

Abstract

We investigate the reasons why income inequality is so high in Spain in the EU context. We first show that the differential in inequality with Germany and other countries is driven by inequality among households who participate in the labor market. Then, we conduct an analysis of different household income aggregates. We also decompose the inter-country gap in inequality into characteristics and coefficients effects using regressions of the Recentered Influence Function for the Gini index. Our results show that the higher inequality observed in Spain is largely associated with lower employment rates, higher incidence of self-employment, lower attained education, as well as the recent increase in the immigration of economically active households. However, the prevalence of extended families in Spain contributes to reducing inequality by diversifying income sources, with retirement pensions playing an important role. Finally, by comparing the situations in 2008 and 2012, we separate the direct effects of the Great Recession on employment and unemployment benefits, from other more permanent factors (such as the weak redistributive effect of taxes and family or housing allowances, or the roles of education and the extended family).

Keywords

Acknowledgements

Acknowledgments

I would like to thank two anonymous reviewers for their helpful comments and to acknowledge the financial support from the Spanish Ministerio de Economía y Competitividad (ECO2013-46516-C4-2-R) and Xunta de Galicia (GRC2015/014 and AGRUP2015/08).

Citation

Gradín, C. (2016), "Why is Income Inequality so High in Spain?", Income Inequality Around the World (Research in Labor Economics, Vol. 44), Emerald Group Publishing Limited, Bingley, pp. 109-177. https://doi.org/10.1108/S0147-912120160000044011

Publisher

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Emerald Group Publishing Limited

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