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The contribution of the spatial dimension to inequality

Working Paper 2020-513

Abstract

This paper provides recent evidence on the contribution of the spatial dimension to inequality and more specifically accounts for the impact of the changes in the territorial distribution of the population on the recent dynamics of income inequality. We use LIS harmonized microdata for a selected sample of OECD countries. We provide new evidence over a more varied group of countries and a more recent period than in previous studies. We perform different types of decompositions to isolate the contribution of the changes in the territorial distribution of the population. The results show a generalized increase in income inequality, with an interesting “reducing effect” on this trend due to inter-territorial population movements.

Authors: Luis Ayala, Javier Martin-Roman, Juan Vicente.

Keywords: income inequality, regional inequality, decomposition methods, counterfactual analysis.
JEL: D31, D63, P52.