Unemployment and Inflation as economic determinants to explain Spanish income inequality: Are redistributive measures in Spain effective in reducing inequality?

Abstract

In this paper, we will analyse the influence of the unemployment and inflation rate on Spanish income inequality. At the same time, we will evaluate how the main redistributive measures to reduce inequality behaved. All this, in a period with different economic cycles, which affected differently the evolution of income distribution. We will employ the Ordinary Least Squares (OLS) method, using time series, to carry out the study. The resulting methodology after applying differencing will allow us to show that both indicators have a negative influence on inequality, showing some signs of persistence. However, it will not adequately capture the effectiveness of redistributive measures. We will not even find evidence on the tax effect. Nevertheless, when analysing the evolution of the indicator used to measure the redistributive effect of the tax, we will see its effectiveness in reducing inequality has been gradually increasing over time.