Macroeconomic Conditions and the Distribution of Income in Spain

28 Pages Posted: 27 Aug 2008

See all articles by Lidia Farré

Lidia Farré

Spanish Council for Scientific Research (CSIC) - Institute for Economic Analysis; Universidad de Alicante

Francis Vella

Georgetown University; IZA Institute of Labor Economics

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Abstract

This paper analyses the impact of changes in macroeconomic con ditions on the income distribution in Spain. Using household data from the Encuesta Continuada de Presupuestos Familiares (ECPF) from 1985 to 1996 we disentangle the effect of aggregate variables on the income distribution by estimating counterfactual densities conditional on different macroeconomic scenarios. In estimation, we use a semi-parametric least squares procedure that allows a flexible interaction between the level of income and a first index of individual characteristics and a second index that captures the role of macroeconomic variables. We find that although inequality displays a decreasing trend over the earlier part of the period examined, the poor performance of the Spanish economy during the early 1990s appears to have reversed this trend. We also conclude that while inflation appears to have no impact on the distribution of income for the period examined, there were important redistributive roles for unemployment, government expenditure, and the level of GDP.

Suggested Citation

Farré, Lidia and Vella, Francis, Macroeconomic Conditions and the Distribution of Income in Spain. LABOUR, Vol. 22, Issue 3, pp. 383-410, September 2008, Available at SSRN: https://ssrn.com/abstract=1248412 or http://dx.doi.org/10.1111/j.1467-9914.2008.00413.x

Lidia Farré

Spanish Council for Scientific Research (CSIC) - Institute for Economic Analysis ( email )

UAB Campus
E-08193 Bellaterra
Spain

Universidad de Alicante ( email )

Campus de San Vicente
Carretera San Vicente del Raspeig
San Vicente del Raspeig, Alicante 03690
Spain

Francis Vella (Contact Author)

Georgetown University ( email )

Washington, DC 20057
United States
202-687-5573 (Phone)

HOME PAGE: http://explore.georgetown.edu/people/fgv/

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

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