Accounting for the decline in Spanish household expenditures inequality during the 1980s

Abstract

In this paper we apply decomposition methods to analyze some of the factors accounting for the decrease in household expenditures inequality in Spain during the 1980s. We adopt a simple one-parameter model in which equivalence scales depend only on household size. Then we propose an inequality decomposition method which minimizes equivalence scales' potential contamination problems. We find that most of the change in overall inequality is due to a reduction in the within-group term in the partition by household size. The bulk of this reduction is accounted for by changes at the lower tail of the distribution in the partitions by the socioeconomic category and educational level of the household head. These two findings are independent of the equivalence scales parameter.