Factor decomposition of cross-country income inequality, 1960–1990

In this paper we present Estebanʹs 1994 [Esteban, J., 1994. La desigualdad interregional en Europa y en España: descripción y análisis. In: Esteban, J.Ma., Vives, X. (dirs.), Crecimiento y convergencia regional en España y en Europa, Vol. 2, Instituto de Análisis Económico] decomposition of the Theil index of inequality over per capita incomes into the (unweighted) sum of the inequality indices of (i) the productivity per employed worker, (ii) the employment rate, (iii) the active over working-age population rate, and (iv) the working-age over total population rate. Each of these factors clearly have different meanings for analysis as well as for policy. We apply this factoral decomposition to a set of 120 countries. We also contrast the empirical findings with the results obtained for the 23 OECD countries. [OECD, Labour Force Statistics, Several issues, Paris].