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Intra-Regional Regional Wage Inequality In Portugal: A Quantile Based Decomposition Analisys

Author

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  • Joao Pereira
  • Aurora Galego

Abstract

Studies report that economic inequality remained relatively stable since the second world war until the 1980s (Lemieux, 2008). However, in the 1980s and 1990s several studies reveal an upward trend in inequality in many countries (Lemieux, 2008). The vast majority of studies analyse inequality at national level or perform comparisons among countries. Studies focusing on intra-regional inequalities are very scarce. A few examples are Dickey (2007) and Monastiriotis (2000) for England. However, in order to better understand the causes of inequality it is important not only to investigate inequalities at national level and even inter-regional differences, but also to study intra-regional inequality. This paper aims at further investigate inequality by focusing on wage differences within regions. We consider the case of Portugal which is referred as one of the countries with highest economic inequality (OECD, 2005, Cardoso,1998). In particular, we analyse the evolution of intra-regional wage inequality in Portugal between 1995 and 2005 and consider data from Quadros de Pessoal. We employ a quantile-based decomposition method suggested by Melly (2005). To the best of our knowledge, this is the first application of this methodology to the issue of regional wage inequality. This approach has several advantages in relation to the usual index measures commonly used in economic inequality analysis. First, it allows analysing economic inequality along the entire wage distribution. Second, single index measures can yield different rankings of inequality, as they weight differently different parts of the wage distribution. Finally, Melly (2005) method decomposes changes in inequality into components explained by changes of characteristics, returns to characteristics and residuals, allowing an improved knowledge of the causes for changes in inequality. Our results show that wage inequality evolution has been different for the several regions in Portugal. In fact, while inequality at national level slightly decreased between 1995 and 2005, some regions have not followed this evolution. Furthermore, there is as well heterogeneity on the determinants of the wage inequality evolution among the regions.

Suggested Citation

  • Joao Pereira & Aurora Galego, 2013. "Intra-Regional Regional Wage Inequality In Portugal: A Quantile Based Decomposition Analisys," ERSA conference papers ersa13p158, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa13p158
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    References listed on IDEAS

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    1. David Card, 1992. "The Effect of Unions on the Distribution of Wages: Redistribution or Relabelling?," NBER Working Papers 4195, National Bureau of Economic Research, Inc.
    2. Cristiano Perugini & Gaetano Martino, 2008. "Income Inequality Within European Regions: Determinants And Effects On Growth," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 54(3), pages 373-406, September.
    3. Karl Taylor, 2006. "UK Wage Inequality: An Industry and Regional Perspective," LABOUR, CEIS, vol. 20(1), pages 91-124, March.
    4. Vieira, J.A.C. & Couto, J.P.A. & Tiago, M.T.B., 2006. "Inter-regional Wage Dispersion in Portugal," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 6(1).
    5. João Pereira & Aurora Galego, 2014. "Inter-Regional Wage Differentials in Portugal: An Analysis Across the Wage Distribution," Regional Studies, Taylor & Francis Journals, vol. 48(9), pages 1529-1546, September.
    6. Pedro Telhado Pereira & Pedro Silva Martins, 2004. "Returns to education and wage equations," Applied Economics, Taylor & Francis Journals, vol. 36(6), pages 525-531.
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    8. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-442, June.
    9. Pedro Carneiro, 2008. "Equality of opportunity and educational achievement in Portugal," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 7(1), pages 17-41, April.
    10. José Mata & José A. F. Machado, 2005. "Counterfactual decomposition of changes in wage distributions using quantile regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(4), pages 445-465.
    11. Inmaculada Garcia & Jose Alberto Molina, 2002. "Inter-regional wage differentials in Spain," Applied Economics Letters, Taylor & Francis Journals, vol. 9(4), pages 209-215.
    12. Cardoso, Ana Rute, 1998. "Earnings Inequality in Portugal: High and Rising?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(3), pages 325-343, September.
    13. Gilles Duranton & Vassilis Monastiriotis, 2002. "Mind the Gaps: The Evolution of Regional Earnings Inequalities in the U.K., 1982-1997," Journal of Regional Science, Wiley Blackwell, vol. 42(2), pages 219-256.
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    More about this item

    Keywords

    Economic inequality; quantile decomposition; regional inequality;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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