Inequality Decomposition in the Arab Region: Application to Jordan, Egypt, Palestine and Tunisia

Economic inequality across socio-demographic groups in the Arab region is high and growing. This paper evaluates the differentials in household expenditures across rural/urban areas, female/male-headed households, non-educated/educated-headed households and nonemployed/employed-headed households, in ten Household Income and Expenditure surveys from four Arab countries: Egypt (2008, 2010 and 2012), Jordan (2006 and 2010), Palestine (2007, 2010 and 2011) and Tunisia (2005 and 2010). Unconditional quantile regressions are used to analyze the differentials across the population distribution and to decompose them by source. Results show that Egypt and Tunisia – countries that have faced political instability during the early 2010s – exhibit relatively high expenditure gaps across rural/urban and non-educated/educated groups. Expenditure gaps in Jordan and Palestine – countries that have largely avoided instability – and those across non-employed/employed and female/male headed households are more moderate. Overall, education and the return to it, geographic location and household composition play an important role in bringing about, as well as reducing, economic inequality across social groups. These findings have important implications for development policy in the Arab region and possibly for our understanding of the socio-political climate leading up to the Arab Spring.