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Spain Is Different: Falling Trends Of Inequeality

In this article we characterize the evolution of inequality in hourly wages, hours of work, labor earnings, household disposable income and household consumption for Spain between 1985 and 2000. We look at both the Encuesta Continua de Presupuestos Familiares and the European Household Community Panel. Our analysis shows that inequality in individual net labor earnings and household net disposable income has decreased substantially. The decreases in the tertiary education premium and in the unemployment rate have been key ingredients to understand this falling trend. However, the inequality reduction has not been monotonic over the period: while it fell in years of economic expansion, there was an inequality surge in the recession of the early nineties. Public transfers have played a crucial role in smoothing out the inequality arising in the labor market, but instead the Spanish family does not seem to have been an important insurance mechanism. Regarding household consumption, inequality has fallen much less than inequality in household net disposable income, with the decrease mostly concentrated in the second half of the eighties. This suggests that the reduction in income inequality has affected the sources of permanent differences between households only during the second half of the eighties. Our estimates of the earnings process for the period are consistent with this view.

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Paper provided by CEMFI in its series Working Papers with number wp2009_0910.

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Date of creation: Sep 2009
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Handle: RePEc:cmf:wpaper:wp2009_0910
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  1. Pijoan-Mas, Josep, 2005. "Precautionary Savings or Working Longer Hours?," CEPR Discussion Papers 5322, C.E.P.R. Discussion Papers.
  2. Josep Oliver Alonso & Xavier Ramos & José Luis Raymond-Bara, 2001. "Recent trends in Spanish Income Distribution: A Robust Picture of Falling Income Inequality," Working Papers wp0107, Department of Applied Economics at Universitat Autonoma of Barcelona.
  3. José Casado, 2011. "From income to consumption: measuring households partial insurance," Empirical Economics, Springer, vol. 40(2), pages 471-495, April.
  4. Sara Rica & Juan Dolado & Vanesa Llorens, 2008. "Ceilings or floors? Gender wage gaps by education in Spain," Journal of Population Economics, Springer, vol. 21(3), pages 777-778, July.
  5. Olympia Bover, 2010. "Wealth Inequality And Household Structure: U.S. Vs. Spain," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(2), pages 259-290, 06.
  6. Pedro Albarran & Raquel Carrasco & Maite Martinez Granado, 2007. "Inequality for wage earners and self-employed : evidence from panel data," Economics Working Papers we072414, Universidad Carlos III, Departamento de Economía.
  7. Richard Blundell & Ian Preston, 1998. "Consumption Inequality And Income Uncertainty," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 603-640, May.
  8. John M. Abowd & David Card, 1986. "On the Covariance Structure of Earnings and Hours Changes," NBER Working Papers 1832, National Bureau of Economic Research, Inc.
  9. Hyeok Jeong & Yong Kim & Iourii Manovskii, 2014. "The Price of Experience," NBER Working Papers 20457, National Bureau of Economic Research, Inc.
  10. Pijoan-Mas, Josep & Sánchez-Marcos, Virginia, 2009. "Spain is Different: Falling Trends of Inequality," CEPR Discussion Papers 7489, C.E.P.R. Discussion Papers.
  11. Jonathan Heathcote & Kjetil Storesletten & Giovanni L. Violante, 2005. "Two Views of Inequality Over the Life Cycle," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 765-775, 04/05.
  12. Richard Blundell & Luigi Pistaferri & Ian Preston, 2004. "Consumption inequality and partial insurance," IFS Working Papers W04/28, Institute for Fiscal Studies.
  13. Manuel A. Hidalgo, 2008. "Wage Inequality in Spain, 1980-2000," Working Papers 08.08, Universidad Pablo de Olavide, Department of Economics.
  14. Fatih Guvenen, 2004. "Learning your Earning: Are Labor Income Shocks Really That Persistent?," 2004 Meeting Papers 177, Society for Economic Dynamics.
  15. MaCurdy, Thomas E., 1982. "The use of time series processes to model the error structure of earnings in a longitudinal data analysis," Journal of Econometrics, Elsevier, vol. 18(1), pages 83-114, January.
  16. Orazio Attanasio & Hamish Low & Virginia Sánchez-Marcos, 2005. "Female Labor Supply As Insurance Against Idiosyncratic Risk," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 755-764, 04/05.
  17. Zvi Eckstein & Éva Nagypál, 2004. "The evolution of U.S. earnings inequality: 1961?2002," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Dec, pages 10-29.
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