Regional Income Distribution in Portugal

Abstract

The structural evolution of the European economy has shown a real convergence between countries and divergence between regions (Mateus et al., 2000), so the economic and social cohesion, namely the approach of the various territories in terms of standard of living is assumed like a primary objective of economic policy. Concerns about inequality in income distribution have gained importance, encouraging the various studies that address specially inequality among individuals [see the studies of Rodrigues (1994, 1999 and 2008)]. Our research aims to address the problem of inequality in income distribution from a different perspective and we want to answer questions like if geography influences the pattern of inequality, or if the Portuguese’s standard of living depends on the place of residence, and finally, if the spatial units that make up the Portuguese territory have been converging in terms of income in the process of growth. The aim of this paper (which emerges from my PhD Thesis) is to study the regional income differences among the regions and municipalities of Portugal. Our individuals are the territorial units. We intend to evaluate convergence or divergence in income growth using a static analysis, with conventional measures and other indicators, being aware the regional differences in economic performance. To meet the objectives set out, after the introduction, we present some considerations concerning the recent developments in the Portuguese economy, from a regional perspective, which represent the framework of socio-economic conditions that can justify the results in terms of inequality and convergence between the territorial units. Then, after a brief literature review and an analysis of income distribution among municipalities and among the NUTS III of Portugal, we present some inequality measures applied to municipalities’ monthly average wage for the period 1991-2002. Finally, we conclude with a synthesis of results and possible future developments in the context of this work. We find a growing inequality between regional incomes over the period 1990-2006. In our view, the distribution of earnings reflects only the actual distribution of economic activity in Portugal, particularly concentrated in the coastal and metropolitan areas of Lisboa and Porto. The economic specialization and level of education among the population of each territorial unit are also, of course, crucial for this asymmetry on earnings.