Measuring the Effect of Wage Inequality on Income Distribution via Theil Index in the Manufacturing Industry of Spain-Portugal

Abstract

Income distribution is defined as sharing income arising from the sale of products among persons, groups, or production factors in a country within specific periods. Income inequality is the wage gaps between persons, groups, or regions. Increasing income inequality is accepted as the primary problem of economies in terms of bringing along many problems. This is because the fair distribution has continued to remain on the agenda of economic policies. There are several methods in measuring the inequality in the distribution of income as well as this study utilized Theil index because of the sensitivity of related index to super and subgroups of the income distribution. Spain and Portugal, in this chapter, were accepted as a single county; Spain and Portugal (each) were accepted as the regions of this presumptive country. Under this assumption, the course of wages inequality in time was revealed by the inequality analysis that was performed for eight sub-sectors of the manufacturing sector of Spain and Portugal for the years between1995 and 2015.