Education level and income inequality: the decomposition of Gini and the generalized entropy measures

Abstract

This research deals with the Italian and Spanish income distribution disaggregated by title of study of the familyhead. The main methodological reference is represented by a new Gini ratio decomposition introduced by Dagum. By using this decomposition it is possible to measure the inequality between subpopulations more correctly and efficiently than the traditional approach that works with particular cases of the generalized entropy inequality measure. In Italy and in Spain the main contribution to the global inequality is, if using the Gini ratio decomposition, the inequality between subpopulations and the title of study of the familyhead proves to be a very useful tool in the income inequality analysis. On the contrary, with the generalized entropy measures decomposition, the inequality within subpopulations presents a very large contribution to the overall inequality.