Decomposition of Regional Income Inequality and Neighborhood Componenta Spatial Theil Index

Resumen

In recent decades, spatial effects have been incorporated into mainstream economics. Nevertheless, although the addition of these spatial effects to the inequality indexes would be a natural extension in this line of research, to our knowledge, there are not contributions assessing neighborhood effects in measures of regional economic inequalities. This paper proposes a Spatial Theil index that provides a decomposition of the Theil index that allows us to assess which part of regional inequalities is due to neighborhood features. The proposal is illustrated for the case of the Spanish peninsular provinces during the period 1980-2008