Income Variability in Romania: Decomposing Income Inequality by Household Characteristics

This paper aims at contributing to the better understanding of the income inequality determinants in Romania. In spite of positive economic evolutions and considerable governmental concerns, income inequality is still high in Romania and has remained almost unchanged during the past 15 years. Neither economic growth, nor the economic crisis that followed during recent years, has been equally distributed across households. The contribution of our paper lies in the decomposition of income inequality by groups of households based on socio-economic characteristics and the estimation of between and within group inequality. We assess the size of income inequality by using the Theil inequality index. Our findings suggest that education and status in employment are amongst the main determinants of income variability.