How equal is income distribution in our country? Is income more concentrated in our province? Where does inequality in income distribution come from? What policies should be implemented to reduce inequality? In this article we will try to answer these questions, and some more. And to do so, we will talk about income distribution in Rosario and Santa Fe.

We will focus on calculating and analyzing the Gini coefficient, one of the most widely accepted ways of measuring income distribution. This coefficient is inspired by the most popular graph for studying inequality, the Lorenz Curve. How does it work? The proportion obtained with the coefficient is the degree of income concentration, which is determined in a range of values ​​from 0 to 1. The extreme value equal to 1 means extreme income concentration. On the contrary, the extreme value equal to 0 means totally equal income distribution.

In the report accompanying this note, we will use family per capita income to calculate the Gini coefficient, based on the idea that a person's standard of living is more closely related to the family budget than to their own income. We will then break down this coefficient into the different sources of income that families receive, in order to better understand the nature of inequality and to be able to answer some of the questions stated at the beginning of the note. The breakdown will be carried out both at the provincial and national level, in order to have a logical comparison parameter between the different levels.

Therefore, all the income that a family has was added up, and then classified based on different factors. sources of income:

• Main occupation: composed of the income of salaried workers and self-employed workers
• Secondary occupation: consisting of income from a secondary occupation prior to the reference week, debts/retroactive payments for occupations prior to the reference month, etc.
• Retirements and pensions: being the amount received for retirements and pensions
• Transfers: is the sum of the amount received from unemployment insurance and from subsidies or social assistance, in money from the government, churches or others.
• Capital: composed of rental income (housing, office, land, etc.) that you own, income from profits from a business in which you do not work, and income from interest or rents from fixed terms/investments

Once the Gini of each source is obtained, the corresponding ones can be calculated Gini elasticitiesWhy would we be interested in doing this? Because elasticities calculations allow us to answer questions that are extremely important for the impact of public policies. For example, if income from one of the sources increases by 1%, how does this affect distribution and inequality?

For the study that accompanies this note, data from the third quarter of the last three years (2016-2017-2018) offered by the Permanent Household Survey (EPH) published by the INDEC. Likewise, the values ​​of each source of income are expressed at 2018 prices, based on the Consumer Price Index (IPC) so that they are comparable.

In general terms, income in the province of Santa Fe is at similar levels to the national average. However, there is heterogeneity between sources. Labor income, retirement and pensions, and transfers show average values ​​higher than at the national level. In the case of secondary employment and capital income, the trend is reversed, with national values ​​being higher.

On the other hand, if per capita income is taken into account, it can be seen that during the whole period the income recorded at the provincial level is lower than the national level. At the same time, it is noted that the economic cycle of the province is synchronized with the national one, showing a procyclical behavior, similar to that found in different studies on the product. In other words, the level of inequality obtained at the provincial level is similar to the national one, although at a lower level and with differences with respect to the national level in what refers to the composition of the income of the families.

The average income from each source in the period is shown in the table below. It shows the percentage of people who directly receive that income, together with the people who are benefited by that same income, that is, who share the same family group. Finally, the third column shows the relationship between beneficiaries and recipients, which reflects the average size of families receiving income from each source.

From the results found, it is clear that 63% of the inequality in income distribution is explained by income from the main occupation, while 23% is explained by retirement and pensions. These values ​​found for the province are similar, although slightly higher than those registered at the national level.

Regarding the calculation of elasticities, it was found that the sources that explain income distribution to a greater extent have an elasticity coefficient close to one. This implies that an increase in these incomes does not generate significant variations in inequality. The only source that generates a reduction in income distribution is transfers, and it is more redistributive in the province than at the national level.

Secondary employment and capital income, on the other hand, are concentrated sources of income, which generate a worse distribution. This effect is stronger at the provincial level than at the national level.

It can be observed in the graph that up to the fifth decile, the province presents a more equal distribution of income than at the national level. However, from the eighth decile onwards this is reversed, and the distribution becomes more equal at the national level than at the provincial level. Therefore, there is no first-order stochastic dominance, meaning that it cannot be stated that income is more equal at the provincial or national level.

The report accompanying this article expands on the above discussion in detail, as well as its methodology. So, in a year characterized by electoral struggle, if we want to improve income distribution, what is the best way? Is it necessary to improve income distribution or is it necessary to increase the level of income?