Regional inequality in Spain: permanent income versus current income

Abstract

The literature on inequality among economies has focused mainly on analysing the dispersion of indicators such as current income per capita. In this paper we adopt a different approach from the usual one. In order to analyse inequality and convergence among Spanish regions, we propose to use a measure of permanent income that takes into account the entire life cycle dimension. On the basis of this approach, we make various simulations to determine the influence on inequality and convergence in permanent income of variables, such as survival rates and the existence or non-existence of convergence in current income. The results indicate that inequality in permanent income is clearly lower than that observed when the full life cycle of individuals is not taken into account.