E. Militaru

National Research Institute for Labour and Social Protection (ROMANIA)
Income inequality is directly correlated with educational opportunities. That is why rising income inequality drives inequality in educational opportunities and, the other side of the coin, education influences the level of incomes earned and the wellbeing of individuals or households. It is broadly believed that raising access to education is conducive to more equity in the income distribution. In Romania, the level of income inequality is amongst the highest in the European Union and the latest developments do not point towards an improvement in this area. The access to education of children from poor families and from rural areas is an issue of concern for the central and local authorities. Our paper attempts to estimate the role of education in driving income inequalities in Romania, with focus on the years of the recent economic crisis. We propose a decomposition approach based on the Theil income inequality index. We estimate the aggregate inequality index on the basis of household disposable income and then, we decompose it by the educational level of the household members. We use the education of the household head and the maximum level of education in the household as measures of educational attainment at household level. By decomposing the inequality index in inequality between and within educational groups, we argue on the importance of education in reducing income inequalities. Whether the economic crisis has been or not responsible for the observed developments of income inequalities between people with different levels of education or between people with the same education is a question that our paper attempts to answer. We build our analysis on EU-SILC data for Romania.