Measuring the effect of formal education on income inequality: A longitudinal analysis across Mediterranean countries

The paper aims at investigating the role of gender and personal education in explaining differences in generating individual earnings and their effects on income inequality. The analysis involves four countries of Southern Europe (Greece, Italy, Portugal, and Spain) in light of the macroeconomic and institutional settings and policy frameworks. Once that the main determinants of income have been sketched through random effects models, the ANOGI (Analysis of Gini) decomposition is performed in order to evaluate the contribution of each subgroup of population with different formal education to the overall income inequality and to assess the degree to which each subpopulation is stratified. In short, Greece and Portugal show the largest gender earnings gaps and the largest differences in returns on education, while earnings inequality is more severe for Italian and Portuguese women. In each country, except for Italy, lower educated workers show the lowest amount of overlapping and, therefore, high levels of income stratification, while higher educated individuals are usually less stratified. Italy instead shows similar degrees of overlapping for both the lowest and the highest education levels.