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A further step to understand income inequality in Chile: A decomposition using three-stages nested Theil index decomposition method

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Author Info

  • Dusan Paredes

    ()
    (IDEAR - Department of Economics, Universidad Católica del Norte - Chile)

  • Victor Iturra

    ()
    (IDEAR - Department of Economics, Universidad Católica del Norte - Chile)

  • Marcelo Lufin

    ()
    (IDEAR - Department of Economics, Universidad Católica del Norte - Chile)

Abstract

The previous literature identifies the high and persistent income inequality of Chile, but the geography of this inequality is still unexplored. To evaluate this dimension, we propose a three-stage decomposition of the Theil index at regional, province and county level. Our decomposition indicates that between 1992 and 2009, 21% of the inequality is attributable to these spatial scales. Inside of them, the highest inequality exists between counties and between regions, although they follow different patterns. The inequality between-counties fell from 65% to 53%. Oppositely, inequality between regions was 21% in 1992, and grew to 35% in 2009.

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File URL: https://sites.google.com/a/ucn.cl/wpeconomia/archivos/WP2012-11.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by Universidad Catolica del Norte, Chile, Department of Economics in its series Documentos de Trabajo en Economia y Ciencia Regional with number 25.

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Length: 33 pages
Date of creation: Aug 2012
Date of revision: Aug 2012
Handle: RePEc:cat:dtecon:dt201211

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Keywords: Three stage nested Theil index; spatial income inequality;

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  1. Pierre-Philippe Combes & Gilles Duranton & Laurent Gobillon, 2011. "The identification of agglomeration economies," Journal of Economic Geography, Oxford University Press, vol. 11(2), pages 253-266, March.
  2. Anthony Shorrocks & Guanghua Wan, 2005. "Spatial decomposition of inequality," Journal of Economic Geography, Oxford University Press, vol. 5(1), pages 59-81, January.
  3. Zhang, Siao-Bo & Kanbur, Ravi, 1999. "What Difference Do Polarization Measures Make? An Application To China," Working Papers 7224, Cornell University, Department of Applied Economics and Management.
  4. Josef Novotný, 2007. "On the measurement of regional inequality: does spatial dimension of income inequality matter?," The Annals of Regional Science, Springer, vol. 41(3), pages 563-580, September.
  5. Dusan Paredes Araya & Victor Iturra Rivera, 2013. "Substitution bias and the construction of a spatial cost of living index," Papers in Regional Science, Wiley Blackwell, vol. 92(1), pages 103-117, 03.
  6. Claudio Agostini & Phillip Brown, 2007. "Desigualdad geográfica en Chile," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 22(1), pages 3-33, June.
  7. Takahiro Akita, 2003. "Decomposing regional income inequality in China and Indonesia using two-stage nested Theil decomposition method," The Annals of Regional Science, Springer, vol. 37(1), pages 55-77, 02.
  8. Dusan Paredes, 2011. "A methodology to compute regional housing price index using matching estimator methods," The Annals of Regional Science, Springer, vol. 46(1), pages 139-157, February.
  9. Sergio J. Rey, 2001. "Spatial Analysis of Regional Income Inequality," Urban/Regional 0110002, EconWPA.
  10. Dante Contreras & Víctor Macías, 2002. "Desigualdad Educacional en Chile: Geografía y Dependencia," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 39(118), pages 395-421.
  11. Gustafsson, Bjorn & Shi, Li, 2002. "Income inequality within and across counties in rural China 1988 and 1995," Journal of Development Economics, Elsevier, vol. 69(1), pages 179-204, October.
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