Earnings inequality in Spain: new evidence using tax data

Abstract

We use tax files from 2004 to 2010 to document the recent evolution of earnings inequality in Spain. We find that inequality went in parallel with the evolution of the unemployment rate during the period. This evolution is consistent with the evidence from Social Security records recently documented in Bonhomme and Hospido (2012). Quantitatively, the 90/10 percentile ratio of daily earnings experienced a 10% increase between 2007 and 2010, which is partly but not fully explained by changes in labour force composition. We also use the tax data to study the evolution of the gender earnings gap, and find that it has decreased throughout the distribution during the period. Lastly, we tentatively exploit the panel dimension of the data to explore the permanent and temporary dimensions of Spanish inequality.