Why has inequality in the Philippines declined? A two-stage hierarchical inequality decomposition analysis by location and education

Abstract

The Philippines has been successful in reducing inequality over the last two decades. This study conducts a two-stage hierarchical inequality decomposition analysis by location and education to explore the determinants of declining expenditure inequality using the Family Income and Expenditure Survey. In the period 1997-2006, falling inequality among urban households with tertiary education is the dominant determinant by explaining 74% of declining overall inequality. In the period 2006-2018, falling disparity between urban and rural areas is the main determinant by explaining 42% of declining overall inequality. Falling inequality among urban households with tertiary education contributed also, but its contribution is 25%. Though expenditure inequality has declined, its level is still very high. To further reduce expenditure inequality, it is imperative to reduce inequality among households with tertiary education. It is also important to reduce inequality between education groups, particularly between households with tertiary education and those with lower education.