What drives regional economic inequalities in Tunisia? Evidence from unconditional quantile decomposition analysis

The paper analyzes the urban-rural, littoral-inland, as well as metropolitan-nonmetropolitan inequalities across the entire welfare distribution. It draws on micro-data from two nationally representative surveys to investigate the structure and dynamics of regional consumption inequality in Tunisia. The analysis covers the five years before the 2011's revolution. It reveals low and stable levels of welfare inequality between inland and littoral regions, but high and growing inequalities along rural–urban and nonmetropolitan-metropolitan lines. Consistent with earlier studies, these results shed light on an urban and metropolitan bias. Regional inequalities are found to be much higher at the top end and the bottom than at the middle of the welfare distribution in both 2005 and 2010. Using the unconditional quantile decomposition, we decompose the distributional welfare differentials among different regions into endowment effects, explained by differences in households' demographic and general characteristics and return effects attributable to unequal returns to these covariates. We find that differences in households' endowments such as demographic composition, standards of living, and human capital, dominate the return effects and contribute more to the regional disparities throughout the welfare distribution.