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Gini Coefficient Computation for Costa Rican Municipalities

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  • Kerry Loaiza-Marín

    (Department of Economic Research, Central Bank of Costa Rica)

Abstract

I detail the computation for the Gini coefficient for Costa Rican municipalities. I use the regional Gini coefficient computed by the National Statistics and Census Institute (INEC) and the Economic Variables Record (REVEC) of the Central Bank of Costa Rica (BCCR). With the REVEC I compute the income inequality measure for each municipality using the geographic location inside the country and the information about income. As the REVEC only has information about the formal sector, I use the regional Gini coefficient from the INEC to correct for the potential inequality due to the informal sector. I found that the Gini coefficient of the formal sector for each municipalitiy is between 0.225 and 0.390, whereas the coefficient with the correction for the informal sector is between 0.379 and 0.664. Then, to diminish the informality could reduce inequality. In the ideal case, with cero informality, the inequality level would be similar to the less unequal countries in the OECD. ***Resumen: Se detalla el cómputo del coeficiente de Gini para los cantones de Costa Rica. Se utiliza el coeficiente de Gini regional calculado por el Instituto Nacional de Estadística y Censos (INEC) y los datos del Registro de Variables Económicas (Revec) del Banco Central de Costa Rica (BCCR). Con el REVEC se computa la desigualdad del ingreso para cada uno de los cantones a partir de la ubicación geográfica dentro del país y la información de ingreso. Como el Revec solo posee información del sector formal, se utiliza el coeficiente de Gini regional computado por INEC para corregir por la potencial desigualdad debido a la existencia del sector informal. Se encuentra que el coeficiente de Gini que considera solamente la actividad del sector formal de cada cantón está entre 0,225 y 0,390, mientras que el coeficiente con la corrección por informalidad está entre 0,379 y 0,664. Entonces, la disminución de la informalidad potencialmente puede colaborar en la reducción de la desigualdad. En el caso ideal, con cero informalidad, el nivel de desigualdad sería similar a los países menos desiguales de la OCDE.

Suggested Citation

  • Kerry Loaiza-Marín, 2022. "Gini Coefficient Computation for Costa Rican Municipalities," Notas Técnicas 2208, Banco Central de Costa Rica.
    • Handle: RePEc:apk:nottec:2208
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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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