Determinants of Income Inequality in Jordan

Income inequality is relatively low in Jordan when measured using the Gini index, which is the common inequality measure. However, other income inequality measures show higher levels of inequality, as the pre-tax national income share of the highest ten percent was more than 40 percent in 2016. Additionally, income inequality is expected to increase with the spread of the COVID-19 pandemic and the slowdown of economic growth. Thus, understanding income inequality and its main drivers is key to addressing it adequately and achieving inclusive growth where no one is left behind. The present paper tackles expenditure inequality in Jordan as a proxy for income by examining the main drivers of the expenditure gap between urban and rural areas and between female-headed households (FHHs) and male-headed households (MHHs) using the most recent available Households Expenditure and Income Survey (HEIS, 2017/2018). Using an Unconditional Quantile Regression (UQR), gender expenditure inequality and spatial expenditure inequality are decomposed into endowment and returns effects. The results show that the spatial expenditure gap is in favor of urban areas, and the gender gap is in favor of FHHs. The education of household heads and the geographical location of households are the key determinants of expenditure gaps between urban and rural households and between FHHs and MHHs.