Income Inequality Measurement in Greece and Alternative Data Sources: 1957-2009 K. Chrissis, A.

Livada Athens University of Economics and Business Technical Report No 262

ATHENS UNIVERSITY OF ECONOMICS AND BUSINESS DEPARTMENT OF STATISTICS OCTOBER

2012

Abstract
The main objective of this discussion paper is the estimation of income inequality in Greece for the period 1957-2009. Alternative income sources are used for the estimation of aggregate and disaggregate measures. Empirical evidence from tabulated tax data indicates an increase on aggregate income inequality. This view is not supported by estimates derived from other data sources (i.e. Household Expenditure Survey). The level of aggregate inequality, also, differs from other empirical results. These findings imply that different data sources and/or methodological approaches could lead to different conclusions for the direction and/or level of aggregate income inequality. Nevertheless, top income shares yield similar trend (for certain periods) and level (to the possible extend) regardless the data sources. This view is consistent with Leigh (2007) that top income shares may be a useful substitute for other measures of inequality.

Income Inequality Measurement in Greece and Alternative Data Sources: 1957-2009

1. Introduction This paper provides empirical evidence for income inequality in Greece. Alternative data sources and methodologies are applied and inequality measures are provided. More specifically, in section 2 empirical time-series evidence on economic inequality from grouped tax data will be presented. The time period of the analysis is from the year 1957 to the year 2009. Micro data are utilized in section 3; data are from EU SILC for the period 2002-2009. In all cases corresponding evidence from other countries are presented. In section 4 empirical results from other studies utilizing other sources [European Community Household Panel (ECHP) and Household Expenditure Survey (HES) micro data] are discussed. Section 5 displays the comparison for all results of aggregate income inequality. The summary of the empirical findings are presented in the section 6.

2. Aggregate measures of income inequality from grouped tax data 2.1. Estimation of aggregate measures of income inequality from grouped tax data Tax data provide detailed information on nominal family income and its sources, as reported annually in tax declaration forms. Family income is the sum of income received by the husband and/or wife. This definition also includes single persons. These data are compiled by the Tax Authorities and have been published annually by the National Statistical Service of Greece (NSGG, now ELSTAT) since 1958. From 2003 onwards the publication is conducted by General Secretariat of Informatics Systems of Ministry of Finance. Total family income is the sum of one or more of the following components1 a) Income from employment b) Income from buildings and lease of land c) Income from securities d) Income from commercial and industrial enterprises e) Income from agricultural enterprises f) Income from self-employment g) Income from abroad
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The category (b) is a merging of two categories after 1984 (economic year 1985): Income from buildings and Income from lease of land excluding buildings. Also category (d) is divided in two subcategories for the years 1976-1998 according to the type of the enterprise. Moreover, imputed income was introduced in 1997 and its impact is in low levels: around 3% for the years 1997-2002 and around 0,5% for the rest years.

The tax declarations are submitted in the following year of the year of reference. The term economic year t refers to income that was acquired in the previous year. Thus, economic year 2010 refers to the calendar year 2009. Tax data are reported in tabulated form (grouped tax data). During the whole period the number of classes has changed, being more analytical in the latter years. Taking into consideration the issues addressed for the data consistency in the previous section, the summary inequality measures are compiled. The following indices have been estimated for the declared income of the physical persons (grouped tax data). Gini Coefficient (G) Relative Mean Deviation (M) Atkinson Index ( ) (=0,5) Atkinson Index ( ) (=1,5) General Entropy (GE(0) Theils L or Mean Log Deviation) (a=0) General Entropy (GE(1) Theils T) (a=1) General Entropy (GE(2) type of Coefficient of Variation2- CV) (a=2) The choice of these indices is based on the underlying properties. Furthermore, these aggregate indices are widely used for the empirical measurement of inequality. The distribution of the data within each class is not known. This issue is being tackled using interpolation methods (Cowell and Mehta, 1982). Two interpolation methods were used: the split-histogram interpolation method and the linear interpolation method. The mean value of the computation of these two techniques provides the final estimation of the measure. The lower and upper bounds of the estimation have been also compiled. The compiled index of Relative Mean Deviation refers only to lower bound. The estimates for the aggregate inequality measures are presented in Table 1. The following charts are the graphical illustration of the time series of each individual index.

The monotonic transformation is GE(2)=(CV^2)/2

Table 1. INCOME INEQUALITY MEASURES ATKINSON 0,5 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 0,150620 0,133402 0,130009 0,137087 0,139420 0,120729 0,125339 0,124811 0,139982 0,143293 0,129247 0,125803 0,144667 0,142744 0,139517 0,143147 0,150104 0,142381 0,136996 0,137011 0,134153 0,142898 0,145295 0,147218 0,154745 0,149913 0,151827 0,152509 0,145880 0,146047 0,150449 0,146861 0,156314 0,160726 0,171794 0,169085 0,170262 0,198601 0,198505 0,212691 0,214098 0,216589 0,224316 0,220672 0,219531 0,221107 0,221719 0,233857 0,220999 0,218191 0,216697 0,221513 0,230772 ATKINSON 1,5 0,313287 0,293722 0,286246 0,303968 0,312264 0,273980 0,284365 0,284268 0,336113 0,343765 0,324962 0,320336 0,389799 0,388022 0,381534 0,389228 0,394428 0,386605 0,387459 0,394175 0,388730 0,483992 0,512957 0,536603 0,589858 0,617441 0,643488 0,665556 0,677322 0,693310 0,704507 0,668302 0,706447 0,764077 0,848538 0,625355 0,629912 0,739465 0,736807 0,770318 0,773032 0,772651 0,765948 0,770963 0,848531 0,853551 0,871791 0,915198 0,863092 0,863773 0,871003 0,879645 0,898989 GENERAL ENTROPY 0 0,282220 0,254428 0,246837 0,264442 0,271550 0,232391 0,242405 0,241968 0,281239 0,289680 0,262817 0,256601 0,310289 0,307042 0,299139 0,307514 0,316698 0,305601 0,301029 0,304480 0,298773 0,342084 0,356077 0,367969 0,400694 0,404044 0,416844 0,426127 0,410515 0,414226 0,430103 0,404701 0,439141 0,467887 0,532496 0,453717 0,456935 0,580770 0,576938 0,631831 0,633260 0,635514 0,641472 0,633222 0,676182 0,680800 0,701416 0,801579 0,700273 0,691441 0,693105 0,714270 0,768572 GENERAL ENTROPY 1 0,392954 0,331153 0,325014 0,337326 0,339821 0,291718 0,303249 0,300364 0,332894 0,338545 0,300990 0,291591 0,327026 0,320998 0,314016 0,322473 0,365569 0,325717 0,299029 0,294920 0,287544 0,296211 0,298338 0,298940 0,313500 0,291436 0,294052 0,291825 0,282211 0,281261 0,288476 0,285277 0,301635 0,308334 0,328888 0,329657 0,333068 0,378535 0,380320 0,408173 0,414321 0,423490 0,452053 0,445673 0,438636 0,444225 0,442247 0,454708 0,437325 0,431890 0,428522 0,437052 0,449830 GENERAL ENTROPY 2 1,287735 0,787963 0,827603 0,820693 0,794060 0,625213 0,676942 0,667374 0,776530 0,749922 0,599381 0,630771 0,620345 0,617437 0,598081 0,596719 1,183395 0,910893 0,535721 0,474531 0,530121 0,433088 0,439562 0,431325 0,519844 0,379982 0,415320 0,367453 0,449396 0,373141 0,377859 0,368121 0,379882 0,382023 0,417591 0,417436 0,425086 0,476077 0,482901 0,532044 0,555770 0,586885 0,701494 0,700373 0,682915 0,811646 0,707039 0,705327 0,863524 0,716971 0,680229 0,681033 0,669007 GINI 0,413949 0,393548 0,387022 0,401974 0,407225 0,376434 0,384327 0,384666 0,408418 0,414897 0,391092 0,385709 0,413822 0,411215 0,406300 0,411731 0,417382 0,408982 0,403768 0,404392 0,399863 0,407658 0,408902 0,410685 0,417930 0,408140 0,408899 0,409391 0,398079 0,398971 0,404288 0,403161 0,415713 0,420293 0,432737 0,434447 0,436485 0,463643 0,464903 0,480464 0,483906 0,488239 0,500150 0,495808 0,490765 0,493436 0,491397 0,498817 0,488780 0,485528 0,483031 0,489687 0,498291 RELATIVE MEAN DEVIATION 0,591613 0,571844 0,559498 0,579896 0,590676 0,536807 0,552220 0,553312 0,582500 0,595419 0,558320 0,550536 0,586860 0,584588 0,576680 0,577988 0,555033 0,535146 0,559172 0,575053 0,554751 0,564951 0,580491 0,575034 0,594532 0,578759 0,577778 0,573240 0,561607 0,562811 0,572324 0,549920 0,531819 0,584255 0,615064 0,617577 0,619126 0,663650 0,663274 0,690938 0,696578 0,704996 0,722323 0,714484 0,706877 0,711761 0,706715 0,717045 0,701187 0,695863 0,691951 0,703828 0,717089

Source: Authors calculations

Looking the period as a whole the empirical results are summarized as follows. The Gini coefficient implies an increase of inequality. It arises from 0,413949 in 1957 to 0,498291 in 2009. The upward trend seems to take place from the early 1990s, being relatively steady in the previous period. The Relative Mean Deviation suggests an increase as well, starting with a value of 0,591613 in 1957 and reaching the level of 0,717089 in 2009. The upward trend, as in the case of Gini, emerges from the early 1990s. The two variations of Atkinson index yield the same results, indicating that is, an increase in income inequality. Atkinson and are 0,150620 and 0,313287 respectively for the year 1957 and 0,230772 and 0,898989 respectively for the year 2009. The Mean Log Deviation (GE(0)) implies an increase of income inequality, with values of 0,282220 and 0,768572 for the years 1957 and 2009. The Theils Index (GE(1)) suggests, also, an increasing trend of inequality during the reference period. It starts at 0,392954 in 1957 and reach the level of 0,449830 in 2009. The monotonic transformation of Coefficient of Variation (GE(2)) suggests a decline of inequality during the period, although the trend is not steady. It, also presents cases of outliers, especially for years 1957, 1973 and 19743. According to the empirical findings, six indices indicate an increase of income inequality while one (GE (2)) indicates the opposite (decrease). The mathematical results are similar to previous studies [Livada (1988) (1991), Livada and Tsakloglou (1993), Dimelis and Livada (1994) (1997)], but the conclusions differ due to the quite different reference period.
Figure 1-ATKINSON 0,5
0.25 0.20 0.15 0.10 0.05 0.00

Source: Authors calculations

Adjustments have made for six years.

1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

0.00

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0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

0.00

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0.60

0.70

0.80

0.90

0.00

0.10

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0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

Source: Authors calculations

Source: Authors calculations

Source: Authors calculations

Source: Authors calculations

Figure 2-ATKINSON 1,5

Figure 3-GENERAL ENTROPY 0 - N (MLD)

Figure 4-GENERAL ENTROPY 1 - THEIL T

Figure 5-GENERAL ENTROPY 2-CV

1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

0.00

0.10

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0.30

0.40

0.50

0.60

0.70

0.80

0.00

0.10

0.20

0.30

0.40

0.50

0.60

Source: Author calculations

Source: Authors calculations

Figure 6-GINI- G

Figure 7-RELATIVE MEAN DEVIATION-M

1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

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2.2. Time series analysis The following table illustrates the results for Least Square linear regression corrected with AR(1)4 for the time series of the estimated inequality measures. In all cases except General Entropy (2) a positive trend appears; the slope coefficient is statistically significant at 1%. The GE(2) seems to be better described by the quadratic model according to Table 3.
Table 2. Trend for aggregate inequality measures
MEASURES Atkinson_0,5 Atkinson_1,5 GE_0 (Mean Log Dev) GE_1 (Theil T) GE_2 (CV) Gini Rel Mean Deviation CONSTANT 0,088968 (5,572799) 0,195963 (5,952647) 0,115026 (2,999479) 0,203592 (3,980095) 0,549742 (4,984390) 0,348991 (16,95194) 0,480551 (10,92479) COEFFICIENT (0,002656) (6,123914) 0,013994 (13,99147) 0,011743 (10,37721) 0,004553 (3,432855) 0,000987* (0,298558) 0,002803 (4,982442) 0,004398 (3,728127) AR(1) 0,810452 (11,89312) 0,613232 (5,649480 0,710967 (7,793125) 0,839840 (14,13672) 0,633000 (6,956647) 0,814197 (11,29531) 0,836165 (11,85611) 0,914274 0,936205 0,510394 0,904415 0,964305 0,964081 R-SQ 0,955844

Source: Authors calculations Note: All values significant at 1% level (except where *) - * Not statistically significant

MEASURES GE_2 (CV)

CONSTANT 0,889414 (8,535418)

Table 3. Quadratic model for GE_2 (CV) COEFFICIENT COEFFICIENT 2 -0,028251 (-3,369575) 0,000488 (3,399722)

AR (1) 0,416900 (3,393311)

R-SQ 0,565948

Source: Authors calculations Note: All values significant at 1% level

The summary tests (p-values) of Jarque Bera (testing whether the series of residuals is normally distributed H0: normal distribution), Durbin-Watson and GodfreyBreusch (testing for autocorrelation and serial correlation respectively: DW-d around 2 no autocorrelation and H0: no serial correlation) and White5 (testing for heteroscedasticity H0: no heteroscedasticity) are presented in the following table. The sign of the coefficient, its p-value and the r-square are also included
Table 4. Consistency tests for time series models Sign p-value R-square Normality DW-d + 0,00 0,96 0,13 2,04 + 0,00 0,96 0,00 1,94 + 0,00 0,96 0,00 2,20 + 0,00 0,91 0,61 1,91 0,00 0,57 0,00 1,63 + 0,00 GINI + 0,00 0,94 0,37 1,94 RMD + 0,00 0,91 0,86 1,98 Source: Authors calculations 1957-2009 Atk 0,5 Atk 1,5 GE_0_mld GE_1_Theil GE_2_CV_sq
4 5

LM(-2) 0,70 0,27 0,18 0,60 0,15 0,36 0,20

White 0,73 0,23 0,11 0,02 0,79 0,04 0,18

OLS indicated strong evidence of autocorrelation This is the original White test, that is with cross terms

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All models have statistically significant coefficients except GE(2). In all cases the trend yield a positive sign. The regression that seems to fit for GE(2) is presented in Table 3; coefficients are statistically significant in 1% level with OLS AR(1) of second order. Table 4 summarizes the results for the consistency of the models. Most of the estimations (Atkinson_0,5, GE(1), Gini and RMD) succeed in the normality of residuals test. The significant issue is that with the insertion of correction term AR(1) the problem of autocorrelation is resolved. Moreover, the models do not face issues of heteroscedasticity (only for 1% for GE(1) and Gini). Finally, taking into account the high values of the r-square, the models are satisfactory enough for a typical time series analysis. In conclusion, it seems that all summary inequality measures, except GE(2), indicate an upward trend for the period 1957-2009, whereas GE(2) indicate a decline followed by an increase (explaining thus the quadratic model of description). Nevertheless, the value of GE(2) never reached its initial level. 2.3. Business cycles characteristics In this section the business cycle characteristics of the estimated aggregate income inequality measures are calculated as supplementary evidence to the typical time series analysis conducted in the previous section. The smoothed trend is estimated according to Hodrick and Prescott (1980) methodology. The Hodrick and Prescott methodology (HP filter) is a popular detrending technique due to the flexibility, simplicity and well-defined criteria on which it was designed. Moreover, the frequency power rule of Ravn and Uhlig (2002) is applied6 (the figure of power suggested is 4 meaning that is 6,25). The methodology has as follows. For each series the trend component is estimated using the HP filter (with the parameter of Ravn and Uhlig). Then the cyclical component is obtained by deriving the deviations of the estimated trend from the actual series. The actual series, the smoothed series according to HP filter (with the parameter of Ravn and Uhlig) and the cyclical component for the seven aggregate inequality indices are presented in the following graphs.

The parameter using the frequency power rule of Ravn and Uhlig is the number of periods per year divided by 4, raised to a power, and multiplied by 1600.

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Figure 8. Hodrick-Prescott Filter (lambda=6.25) .24 .20 .16 .012 .008 .004 .000 -.004 -.008 -.012 60 65 70 75 ATK_05 80 85 90 95 00 Cycle 05 -.05 -.10 60 .12 .08 .15

Figure 9. Hodrick-Prescott Filter (lambda=6.25) 1.0 0.8 0.6 .10 .05 .00 0.4 0.2

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75 ATK_15

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Trend

Figure 10. Hodrick-Prescott Filter (lambda=6.25) 1.0 0.8

Figure 11. Hodrick-Prescott Filter (lambda=6.25) .50 .45 .40

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0.6 .04 0.4 .02 0.2 .00 -.02 -.04 60 65 70 75 80 85 90 Trend 95 00 05 60 65 70 75 80 85 90 Trend 95 00 05

.35 .30 .25

.00 -.04 -.08

GE_0_MLD

Cycle

GE_1_THEIL

Cycle

Figure 12. Hodrick-Prescott Filter (lambda=6.25) 1.2 1.0 .6 .4 .2 0.2 .0 -.2 60 65 70 75 80 85 90 Trend 95 00 05 .00 -.01 -.02 60 0.8 0.6 0.4 .02 .01

Figure 13. Hodrick-Prescott Filter (lambda=6.25) .52 .48 .44 .40 .36

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Figure 14. Hodrick-Prescott Filter (lambda=6.25) .75 .70 .65 .04 .02 .50 .00 -.02 -.04 60 65 70 75 RMD 80 85 90 95 00 Cycle 05 .60 .55

Trend

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2.4 International experience There is an enormous amount of empirical research on income inequality. As a result several cross-national datasets have been compiled (for a review, see Atkinson and Brandolini 2001). One of the most influential projects is the Luxemburg Income Study (LIS). LIS is covering a variety of countries (mainly European in addition to USA, Australia, Mexico etc.) and provides micro data for demographic, labor market, expenditure and income variables. There are six waves7 (around 1980, 1985, 1990, 1995, 2000 and 2004) and wave 7 is under a new template (revised in 2011). The micro data are derived from various surveys; for example data for Greece are included in Wave IV (ECHP8 data), Wave V (ECHP data) and Wave VI (EU-SILC9 data). Consequently, data from national surveys are harmonized and standardized before the calculation of income inequality indices. Another known database is the dataset compiled by Deininger and Squire (1996). They combined many earlier datasets and evaluated the quality of their observations. The issue, nevertheless, is that the estimates are based on different income definitions and reference units; they refer that differences in the definition of the underlying data might still affect intertemporal and international comparability. The successor to the Deininger and Squire data set is the World Income Inequality Database (WIID), created by the United Nations University (UNU-WIDER). Data from the two previous datasets and from other sources are incorporated. Also the new data of Deininger and Squire 2004 are included; the update is only published in WIID2 (current version 2c in 2008) due to agreement between the World Bank and WIDER to publish one database only. From methodological point of view, definitions of income and consumption are used, the household is to be the basic statistical unit (otherwise it is considered problem and is reported) and income or consumption is to be adjusted to take account of household size using per capita incomes or consumption. Babones and Alvarez-Rivadulla (2007) made an effort to unify the data of WIID compiling the Standardized Income Distribution Database (SIDD). They estimated adjustment factors for different scopes of coverage, income definitions and reference

And historical databases for Canada, Germany, Sweden, UK and USA The European Community Household Panel (ECHP) is a survey based on a standardized questionnaire covering a wide range of topics such as income, health, education etc. The survey was launched in 1994 and ended at 2001. See also Section 4/ECHP.
8 9

The European Union has set up a survey for collecting data on income, poverty, social exclusion and living conditions. The European Union Survey on Income and Living Conditions (EU SILC) includes micro data on income on household and personal level that can be used for the estimation of income distribution. This survey replaced the European Community Household Panel (ECHP). See also Section 3.

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units which bring all data to a common standard based on national coverage, gross income and household per capita inequality. Another database is the Standardized World Income Inequality Database (SWIID) compiled by Solt (2009). Solt uses a custom missing data algorithm to standardize the WIID (ver 2c-2008); data collected by the LIS served as standard. According to the author the SWIID provides comparable Gini indices of gross and net income inequality for 173 countries (SWIID version 3.1 ) for as years as possible from 1960. Data from SWIID are selected in order to compare the empirical findings from the usage of tabulated tax data with other countries. It should be noted that the results are not totally comparable since the data sources and the methodology differs. As it is implied SWIID utilizes all available data; it summarizes (before the standardizing algorithm) the reference units (5 categories) and income definitions (4 categories). For comparison reasons, the choice of the variable is the gross income since the indices derived from tabulated tax data refers to declared income, that is the tax has not been paid; nevertheless the amounts does not include social contributions. Therefore, the substantial existing inconsistencies should be taken into consideration and the comparison is conducted for indicative reasons. The following figure presents the Gini coefficient derived from the SWIID and tabulated tax data for Greece. It is apparent that considerable differences exist. The time series from SWIID indicate intense variations during the whole period. Compared to tax data, values are higher until 1993 while values are quite close in the beginning of 70s in the middle of 80s and in the beginning of the decade of 2000. Similarities in the trend (increase) are detected in the second half of 80s and 90s, being more intense in estimates derived from SWIID and tax data correspondingly.
Figure 15 - International Comparison I - Gini coefficient
0.6

0.55

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0.25 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Greece Sources: Authors calculations and SWIID 3.1

Greece_tax

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The comparison of Gini s estimates (grouped tax data) for Greece is conducted with two country groups. The first group consists of South European countries such as Italy, Spain, Portugal and France (although France could be considered part of Central Europe). The second group includes countries from Central and North Europe (Germany, Switzerland, Netherlands and Sweden) as well as UK and USA. The results of the comparison of Greece with the first group (Italy, France, Spain, Portugal) are presented in the next figure. Looking at the whole period, aggregate income inequality in Greece is usually lower than Portugal, higher than Spain (with the exception of late 60s and mid-70s), France (with the exception of first half of 90s and second half of the decade of 2010) while is lower than Italy until 1980 and higher from mid 90s and onwards. It is noticeable that Gini coefficient is in higher level in Greece from the mid 1990s with the exception of Portugal and partly France; in France is higher only in the second half of the last decade.
Figure 16 - International Comparison II - Gini coefficient
0.65

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0.25 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

France Sources: Authors calculations and SWIID 3.1

Italy

Spain

Portugal

Greece_tax

The outcome of the comparison of Greece with the second group (Germany, Switzerland, Netherlands, Sweden, UK and USA is presented in the next figure. Until 1980, inequality in Greece is higher than in UK and in the same levels with USA (though in USA is higher prior to 1970) and lower than other countries with the exception of certain years (almost equal for Germany in 1972 and 1977, Sweden in 1975 and Netherlands in 1973 and 1977) or periods (lower in Sweden in the late 60s). In the decade of 1980 inequality in Greece is higher only compared to Netherlands and partly Germany (only for the first half of the decade) and in the same level with Switzerland and partly USA and UK (both in the beginning of the decade). Greek Gini increases more intensely in the beginning of 90s. In the second half of 1990s aggregate income inequality in Greece is higher than every country. It is exceed only by Germany (late 90s) and Netherlands (early 00s). Finally in the second half of the
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last decade the level are similar to UK and slightly above USA, Sweden and Switzerland.
Figure 17 - International Comparison III - Gini coefficient
0.6

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0.25 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Germany USA UK Ireland Sweden Switzerland Netherlands Greece_tax

Sources: Authors calculations and SWIID 3.1

Since, as it was noted, the results are not fully comparable it is not necessary to take into account the absolute levels of the Gini s estimates. The broader conclusion could be that after the mid 1990s aggregate income inequality in Greece is in high levels compared with other countries, while it was a medium case in the previous period.

3. Aggregate measures of income inequality from EU-SILC data 3.1. Estimation of aggregate measures of income inequality from EU-SILC data The European Union has set up a survey for collecting data on income, poverty, social exclusion and living conditions. The European Union Survey on Income and Living Conditions (EU SILC) includes micro data on income on household and personal level that can be used for the estimation of income distribution. This survey replaced the European Community Household Panel (ECHP). The EU SILC project was launched in 2003 for Greece. The data are produced on annual basis and the reference population is all private households and their current members residing in the territory of the Member State at the time of data collection. The year of the survey contains data for the previous year; thus survey for 2010 illustrates information for the year 2009. EU SILC data contain information for various components of income. Therefore, several variables that approach the concept of income have been calculated. These variables have been utilized to estimate the distribution of income in the whole
17

population. Eighteen (18) variables were compiled. The most appropriate - according to the topic - have been used for income inequality analysis. These variables describe the concept of income on household level. The size of the household and the age of its members are important factors, therefore the use of an equivalence scale is appropriate. In this study the "OECD-modified scale" is utilized. This scale, first proposed by Haagenars et al. (1994), assigns a value of 1 to the household head, of 0.5 to each additional adult member and of 0.3 to each child. The time period of the analysis is from the year 2002 to the year 2009. The variable used for the estimation of income distribution is the Total net household income_ no negative PY050N (HY010net_nn). It has been adjusted for the size of household and the age of the members of household with the OECD-modified scale. Total net household income_ no negative PY050G (HY010net_nn): This variable includes net income on household level taking into account, also, components of personal net income. It, therefore, includes net employee cash or near cash income, company car, net cash benefits or losses from self-employment (including royalties), unemployment benefits, old-age benefits, survivor' benefits, sickness benefits, disability benefits, education-related allowances, net income from rental of a property or land, family/children related allowances, benefit from social exclusion not elsewhere classified, housing allowances, regular inter-household cash transfers received, interests, dividends, profit from capital investments in unincorporated business, income received by people aged under 16. In this case we do not take into account the negative values in the variable net cash benefits or losses from self-employment (including royalties). This variable is slightly different from the corresponding one (Total disposable household income (HY020)) used by ELSTAT. The rationale was mainly the conceptual difficulty of incorporating negative income in the compilation. Nevertheless the latter variable will be used for international comparison purposes. Basic descriptive statistics, percentiles, income shares (deciles), ratio of income shares and aggregate income inequality measures have been estimated for the Total net household income_ no negative PY050N (HY010net_nn). The inequality indices are Gini coefficient, Atkinson index (parameters 0,5 and 1,5), General Entropy Indices [parameters 0 (Theil L), 1(Theil T) and 2] and Coefficient of Variation. The results are summarized in the following table. It is noted that the years are the reference periods and not the years the survey has been conducted, i.e 2009 are results from the survey of 2010.

18

HY010NET_NN_EQ Observations Average St.dev Percentiles-1% Percentiles-5% Percentiles-10% Percentiles-25% Percentiles-50% Percentiles-75% Percentiles-90% Percentiles-95% Percentiles-99% Shares Decile_01 Decile_02 Decile_03 Decile_04 Decile_05 Decile_06 Decile_07 Decile_08 Decile_09 Decile_10 S90/S10 S80/S20 GINI Atkinson 0,5 Atkinson 1,5 GE(0)=Theil L GE(1)=Theil T GE(2)=CV CV Source: Authors calculations

Table 5 Total net household income_ no negative PY050N (HY010net_nn) 2002 2003 2004 2005 2006 6665 6252 5568 5700 5643 9756 10211 10945 11480 12133 7500 7471 8127 8719 9744 1245 265 1000 1817 1333 2400 2732 3000 3251 3433 3344 3760 3945 4153 4336 5300 5699 6000 6188 6526 8012 8566 9000 9415 9847 12203 12902 13587 14180 14770 17300 18040 19600 20513 21684 21793 22310 24667 26012 26871 37667 37727 42830 43975 49068

2007 6503 12905 10165 1500 3889 4861 7125 10600 15822 22590 28000 49424

2008 7036 13441 10827 0 4014 5043 7619 11013 16373 23125 29174 57400

2009 7005 13503 10176 1440 4260 5357 7676 11147 16420 23400 29005 51997

0,02 0,04 0,05 0,06 0,08 0,09 0,10 0,13 0,16 0,26 11,11 6,38 0,352 0,104 0,280 0,214 0,216 0,295 0,769

0,02 0,04 0,06 0,07 0,08 0,09 0,11 0,13 0,16 0,25 10,45 5,98 0,340 0,100 0,259 0,193 0,193 0,268 0,732

0,03 0,04 0,05 0,07 0,08 0,09 0,10 0,12 0,15 0,26 10,41 6,14 0,348 0,102 0,269 0,204 0,207 0,276 0,742

0,03 0,04 0,05 0,06 0,08 0,09 0,10 0,12 0,16 0,27 10,05 6,12 0,350 0,102 0,268 0,207 0,213 0,288 0,759

0,03 0,04 0,05 0,06 0,08 0,09 0,10 0,12 0,15 0,27 10,52 6,21 0,354 0,106 0,273 0,211 0,222 0,322 0,803

0,03 0,04 0,06 0,07 0,08 0,09 0,10 0,12 0,15 0,26 9,63 5,86 0,343 0,101 0,267 0,200 0,210 0,310 0,788

0,02 0,04 0,06 0,07 0,08 0,09 0,10 0,12 0,15 0,27 11,56 6,22 0,349 0,103 0,265 0,200 0,213 0,324 0,805

0,03 0,05 0,06 0,07 0,08 0,09 0,10 0,12 0,15 0,26 9,37 5,57 0,335 0,096 0,254 0,190 0,199 0,284 0,754

According to the Table 5 for the Total net household income_ no negative PY050N (HY010net_nn), the average income illustrates an increasing trend, departing from 9.756 in 2002 and resulting in 13.503 in 2009. The level of 2009 is not lower compared to the corresponding one of 2008, but the trend of the increase is considerably less intense since Greece had already entered recession. The 10% income share yields approximately 26% of the generated income, while the lower 10% is recipient of approximately 2,5% of income. The indices that indicate the gap between the income shares of certain portions of population are S80/S20 and S90/S10, which is simply the ratio between the income share of upper and lower income classes. There has been a small decrease in both indices; nevertheless the trend is not stable for the whole period. The decrease is more obvious in the year 2009 especially for S90/S10. This implies that the recession, which is more apparent from 2009, seems to affect more the upper income classes. Nevertheless, since no data are available for the rest period of economic crisis this aspect is under scrutiny.
19

The behavior of the aggregate inequality indices (GINI, Atkinson_0,5, Atkinson_1,5, General Entropy_0, General Entropy_1, General Entropy_2 and Coefficient of Variation) is rather stable with miniscule decline. In all cases the absolute values are slightly changing in both directions (increase or decrease); nevertheless, in all cases a small decrease is noted from 2008 to 2009. This element, also, implies a miniscule decline in inequality in the beginning of economic recession in Greece. Though, due to the absence of data for the rest of the period of economic crisis no firm conclusions can be drawn. The following figures summarizes the main results for the Total net household income_ no negative PY050N (HY010net_nn). Figure 18 illustrates the trend of the average income, Figure 19 shows the trend of lower 10% and 20% and upper 10% and 20% of income shares, Figure 20 contains the indices of S90/S10 and S80/S20 and finally Figure 21 illustrates the trend of the seven aggregate inequality indices. Once again it is noted that the reference year of the survey is the previous year (t-1).
Figure 18. Total net household income_no negative PY050N (HY010net_nn) Average Income

16000 14000 12000 10000 8000 6000 4000 2000 0 2002 2003 2004 2005 2006 2007 2008 2009 Average
Sources: Authors calculations

Figure 19. Total net household income_no negative PY050N (HY010net_nn) Income Shares

0.3 0.25 0.2 0.15 0.1 0.05 0 2002 2003 2004 Decile_01 Decile_09
Sources: Authors calculations

2005

2006

2007

2008

2009

Decile_02 Decile_10

20

Figure 20. Total net household income_no negative PY050N (HY010net_nn) S90/S10 and S80/S20 indices

14 12 10 8 6 4 2 0 2002 2003 2004 2005 S90/S10

Sources: Authors calculations

2006

2007

2008

2009

S80/S20

Figure 21. Total net household income_no negative PY050N (HY010net_nn) Aggregate inequality indices

0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2002 2003 2004 2005 2006 2007 2008 2009
Sources: Authors calculations

GINI Atkinson 0,5 Atkinson 1,5 GE(0)=Theil L GE(1)=Theil T GE(2)=CV CV

Top Income Shares Chrissis, Livada and Tsakloglou (2011) estimated the top income shares from grouped tax data according to Piketty (2001) approach. The concept of the declared income, which was the underlying variable, is relatively comparable with the variable of the Total net household income_ no negative PY050N (HY010net_nn). This variable contains no negative values and the net components of the income are relative similar to the declared tax income, since most of these components are to be declared to the tax authorities. It is reminded that, mainly, net amounts are to be reported in the tax declarations (i.e. salaries, wages, pensions etc). Table 6 illustrates the results for the variable Total net household income_ no negative PY050N (HY010net_nn) for 1%, 0,5% and 0,1% top income shares (after applying OECD equivalence scale).

21

Table 6. Top income shares for Total net household income_no negative PY050N(HY010net_nn) Year 2002 2003 2004 2005 2006 2007 2008 TIS 1% 5,38% 5,01% 5,30% 5,49% 5,99% 5,98% 6,15% TIS 0,5% 3,30% 3,02% 3,11% 3,30% 3,77% 3,71% 3,79% TIS 0,1% 1,06% 1,02% 0,89% 0,96% 1,14% 1,05% 1,20% Sources: Authors calculations

2009 5,80% 3,59% 1,08%

3.2. International experience The main variable used in this study for the estimation of income distribution is the Total net household income_ no negative PY050N (HY010net_nn), which incorporates the net components of household income without taking into account negative values for net cash benefits or losses from self-employment (including royalties). As noted in this section, this variable is slightly different in interpretation and in compilation procedure from the corresponding one (Total disposable household income (HY020)) used by ELSTAT, which is described as Total disposable household income (HY020): This variable includes income on household level taking into account, also, components of personal income. It, therefore, includes gross employee cash or near cash income, company car, gross cash benefits or losses from self-employment (including royalties), unemployment benefits, old-age benefits, survivor' benefits, sickness benefits, disability benefits, education-related allowances, income from rental of a property or land, family/children related allowances, social exclusion not elsewhere classified, housing allowances, regular inter-household cash transfers received, interests, dividends, profit from capital investments in unincorporated business and income received by people aged under 16 (HY110G)) minus regular taxes on wealth, regular inter-household cash transfer paid and tax on income and social insurance contributions. The concept of disposable income differs from the concept of net income but this is the only variable that can be used for international comparison. The ratio S80/S20 and Gini coefficient will be reviewed. The following table contains the estimations for these two measures according to Eurostat (data provided by ELSTAT) and according to authors calculations (for both variables)
Table 7. Aggregate inequality measures HY020_Eurostat 2002 2003 2004 2005 2006 2007 2008 2009 S80/S20 6,4 5,9 5,8 6,1 6 5,9 5,8 5,6 Gini 34,7 33 33,2 34,3 34,3 33,4 33,1 32,9 HY020 2002 2003 2004 2005 2006 2007 2008 2009 S80/S20 6,5 6,4 6,2 6,2 6,2 5,9 6,2 5,6 GINI 35,1 34,1 34,3 34,6 34,7 33,8 34,3 33,1 HY010NET_NN 2002 2003 2004 2005 2006 2007 2008 2009 S80/S20 6,4 6,0 6,1 6,1 6,2 5,9 6,2 5,6 GINI 35,2 34,0 34,8 35,0 35,4 34,3 34,9 33,5 Sources: Eurostat and authors calculations Note 1: The year is the reference year (i.e. 2009 means that the survey year is 2010)

There are some differences for total disposable household income in the compilation but the trend is the same. Difference are also observed between ELSTAT s press
22

releases (for years 2002 and 200310) and Eurostat s data. The differences, also, from the total net household income are small but they exist. Thus, these differences should be taken into consideration for the international comparison. The following figures illustrate the ratio S80/S20 and Gini coefficient for total disposable household income for Greece and European Union 27 11 and Euro Area 1712. The reason for the sort period for comparison is due to the lack of data for European averages. It is reminded that years correspond to reference years and not the years of survey.
Figure 22. S80/S20_Total disposable household income 7 6 5 4 3 2 1 0

2004

2005
EU (27 countries)

2006

2007
Euro area (17 countries)

2008
Greece

2009

Source: Eurostat

10

According to press releases for the year 2003 (press release 2004): The S80/S20 is 6,0 (instead of 5,9) and Gini is 33,1 (instead of 33) and for the year 2002 (press release 2003): The S80/S20 is 6,6 (instead of 6,4) and 35,1 (instead of 34,7) 11 The European Union (EU27) consists of 27 Member States: Belgium, Bulgaria, the Czech Republic, Denmark, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, the Netherlands, Austria, Poland, Portugal, Romania, Slovenia, Slovakia, Finland, Sweden and the United Kingdom plus the European Central Bank and the EU institutions. 12 The euro area (EA17) consists of 17 Member States: Belgium, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia, Slovakia and Finland plus the European Central Bank.

23

Figure 23. GINI_Total disposable household income 35 34 33 32 31 30 29 28 27 26

2004

2005
EU (27 countries)

2006

2007
Euro area (17 countries)

2008
Greece

2009

Source: Eurostat

The empirical findings indicate that aggregate income inequality in Greece is in higher level than the average of both European Union and Euro area. The following figures illustrate analytical results for the year 2009 for the ratio S80/S20 and Gini coefficient. In both cases Greece yield lower aggregate income inequality only from Lithuania, Spain, Latvia, Romania and Bulgaria, whereas inequality is higher in Portugal, Ireland and United Kingdom according to Gini and lower (Portugal is the same) according to S80/S20 ratio. In any case Greece seems to suffer from intense aggregate income inequality for the European standards.
Figure 24. S80/S20_Total disposable household income 2009 8 7 6 5 4 3 2 1 0 Denmark Latvia Germany Slovenia Malta Portugal Slovakia Greece Luxembourg EU (27 countries) Euro area (17 countries) Lithuania Netherlands Romania Hungary Belgium Sweden Austria Spain Cyprus Poland France Finland Ireland United Kingdom Bulgaria Czech Republic Estonia Italy

Source: Eurostat

24

Figure 25. GINI_Total dispasable household income 2009 40 35 30 25 20 15 10 5 0

Source: Eurostat

4. Results from other data sources The empirical findings from Household Expenditure Survey (HES) and European Community Household Panel (ECHP) micro data are presented in this section. Household Expenditure Survey (HES) It has been stated that micro data from Household Expenditure Survey (HES) have been utilized for the estimation of income inequality. According to Mitrakos and Tsakloglou (2012) available data exist for the HES of 1974, 1981/82, 1987/88, 1993/94, 1998/99, 2004/05 and 2008. The concept of income includes monetary incomes from all sources, such as wages, self-employment earnings, pensions, rents, interest payments dividends, cash benefits (net of tax paid). Moreover, the definition of income includes the non-cash components, namely, imputed rents, other non-cash incomes (consumption of own farm and non-farm production, in-kind transfers from other households and fringe benefits). Adjustments were made for the size of the household; the equivalence scale used was 1,00 for head of household, 0,5 for other member above 13 years and 0,3 for under 13 years. Moreover, data of each HES are expressed in constant mid-year prices and then in 1974 constant prices. It should be noted that the authors compile, also, the distribution of consumption expenditures and they state that income information from HES is considered less reliable from ELSTAT. Nevertheless the conclusions do not differ substantially using the two distributions. Other researchers utilize only consumption data [Sarris and Zografakis (2000)].

25

The empirical results from income distribution are illustrated in the following tables13
INCOME SHARES 1 2 3 4 5 6 7 8 9 10 1974 2,3 4,0 5,1 6,1 7,2 8,4 9,9 12,0 15,3 29,7 Table 8. Top Income Shares from HES micro data 1982 1988 1994 3,2 3,0 3,1 4,9 4,8 4,8 6,0 6,0 5,9 7,0 7,0 7,0 8,0 8,0 8,1 9,1 9,1 9,3 10,4 10,5 10,6 12,2 12,3 12,3 14,8 15,0 14,9 24,3 24,4 24,0 1999 3,0 4,7 5,9 6,8 7,9 9,0 10,4 12,1 15,0 25,1 2004 3,5 5,1 6,1 7,1 8,1 9,3 10,6 12,2 14,7 23,2 2008 3,7 5,2 6,2 7,1 8,2 9,3 10,5 12,1 14,6 23,3

Source: Mitrakos and Tsakloglou (2012)

The aggregate inequality measures are summarized in the following table

Table 9. Aggregate inequality measures from HES micro data 1974 1982 1988 1994 GINI 0,382 0,309 0,314 0,310 VARIANCE OF LOGARITHMS (L) 0,497 0,314 0,339 0,322 THEIL (T) INDEX 0,274 0,170 0,176 0,170 MEAN LOGARITHMIC DEVIATION (N) 0,255 0,161 0,170 0,163 ATKINSON INDEX (0,5) 0,123 0,079 0,082 0,079 ATKINSON INDEX (2,0) 0,407 0,274 0,295 0,279 1999 0,322 0,346 0,187 0,177 0,086 0,300 2004 0,292 NA NA NA NA NA 2008 0,288 NA NA NA NA NA

Sources: Mitrakos and Tsakloglou (2012), Mitrakos (2005) (2003) (1999), Mitrakos and Tsakloglou (1998)

Furthermore, Mitrakos and Tsakloglou (2012) estimate the Gini coefficient without imputed personal income. As expected the coefficient is larger.
Table 10. Gini coefficient from HES micro data 1994 1999 GINI 0,340 0,347 2004 0,325 2008 0,310

Source: Mitrakos and Tsakloglou (2012)

Another interesting aspect is that Mitrakos (2007) has compiled the 1% top income share based on HES data. It should be noted, nevertheless, that the shares in this study differ slightly from the previous ones presented.
UPPER SHARE 1% Table 11. 1% Top Income Share from HES micro data 1974 1988 1994 2,3 3,0 3,1 2004 3,5

Source: Mitrakos (2007)

European Community Household Panel (ECHP) The European Community Household Panel (ECHP) is a survey based on a standardized questionnaire covering a wide range of topics such as income, health, education etc. The survey was launched in 1994 and ended at 200214. According to Eurostat the characteristics of ECHP is the multi-dimensional coverage, the crossnational comparability and the longitudinal or panel design. The definition of income refers to total household income. Total household income is taken to be all the net monetary income received by the household and its members at the time of the interview (t) during the survey reference year (t-1).This includes income from work (employment and self-employment); private income (from investments, property and
13

The figures coincides with Mitrakos (2007) for the years 1974, 1988, 1994 and 2004, with Mitrakos (2003) for the years 1982, 1988, 1994 and 1999, with Mitrakos (1999) for the years 1974, 1982, 1988 and 1994 and with Tsakloglou and Mitrakos (1998) for 1994. 14 Eurostat refers duration of 8 years (1994-2001)

26

private transfers to the household), pensions and other social transfers directly received. No account has been taken of indirect social transfers (such as the reimbursement of medical expenses), receipts in kind and imputed rent for owneroccupied accommodation. In order to take into account differences in household size and composition in the comparison of income levels, the amounts given here are per equivalent adult. The households total income is divided by its equivalent size, using the modified OECD equivalence scale. This scale gives a weight of 1.0 to the first adult, 0.5 to the second and each subsequent person aged 14 and over and 0.3 to each child aged under 14 in the household. It should be noted that equivalised income is defined on the household level, so that each person (adult or child) in the same household has the same equivalised income. The year of the survey contains data for the previous year; thus survey for 2002 illustrates information for the year 2001. The empirical findings for the Gini coefficient and for the S80/20 ratio are presented in the following table:
Year of Survey GINI S80/20 Table 12. Gini coefficient and ratio S80/20 from ECHP micro data 1995 1996 1997 1998 1999 2000 0,35 0,34 0,35 0,35 0,34 0,33 6,5 6,3 6,6 6,5 6,2 5,8 2001 0,33 5,7 2002 0,35 6,6

Sources: Eurostat (2002), Eurostat website, ELSTAT various bulletins Note: Year: Year of survey

5. Comparisons In the previous sections different data sources and methodological approaches have been applied for the estimation of income inequality. Moreover, results from other studies have been presented. The main differences can be categorized as follows Data sources: Grouped tax data, Household Expenditure Survey (HES) micro data, European Community Household Panel (ECHP) micro data and European Union Survey on Income and Living conditions (EU-SILC) micro have been used Methodology: There are certain variations in the methodology applied. The usage of grouped or micro data dictates the application of different statistical specification of the aggregate inequality indices (interpolation techniques have, also, been used in the case of grouped tax data). Moreover different compilation procedure was employed in the case of top income shares in tax data. Unit of analysis/ equivalence scale: The unit of analysis is the household in all cases. Nevertheless the equivalence scale is only used when micro data are available Income: The definition of income is not the same; studies using HES include also items of imputed person income

27

Despite these differences it is interesting to compare the empirical findings from a macroeconomic point of view. The following figure illustrates the results for the estimation of Gini coefficient from tabulated tax data and micro data from HES, ECHP and EU-SILC.
Figure 26. GINI coefficient from various data sources
0.6

0.5

0.4

0.3

0.2

0.1

0 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

GINI_HES_NI

GINI_HES

GINI_ECHP

GINI_EU SILC

GINI_TAX

Sources: Authors calculations, Mitrakos and Tsakloglou (2012) (1998), Mitrakos (2005) (2003), ELSTAT various bulletins, Eurostat (2000) (2003) Note 1: Gini_HES_NI: Gini from HES micro data with no imputed personal income items - Mitrakos and Tsakloglou (2012) Note 2: Gini_HES: Gini from HES micro data - Mitrakos and Tsakloglou (2012) (1998), Mitrakos (2005) (2003) Note 3: Gini_ECHP: Gini from ECHP micro data - Eurostat (2002), Eurostat website, ELSTAT various bulletins Note 4: Gini_EU SILC: Gini from EU-SILC micro data authors calculations Note 5: Gini_TAX: Gini from grouped tax data authors calculations

The Gini coefficient derived from tabulated tax data (GINI_tax) is in higher level in all cases. As expected Gini from HES micro data (GINI_HES) yields the smaller values, since it includes non cash components. Data from HES with no imputed personal income (GINI_HES_NI) result in higher values of the coefficient. The coefficient is both lower (1994) and higher (1999) compared with the corresponding one from ECHP data (GINI_ECHP). Furthermore, Gini is higher (compared to HES in 2004 and 2008) when is derived from EU-SILC micro data (GINI_EU SILC). From macroeconomic point of view, apart from the level, the behavior of the coefficient is important. According to HES data, there is an impressive decrease from 1974 to 1982. For the period 1982-1999 the level of the income inequality does not alter significantly. On the contrary a decreasing trend exists for the period 1999-

28

200815. The trend is similar for HES data when imputed personal income is not included for the period 1994-2008: a small increase is detected for 1994-1999 followed by a small decrease for the remaining period; as already stated the levels of the coefficient in this case is higher. Micro data from ECHP indicate a relative constant trend for the period 1994-2001. The coefficient derived from EU-SILC micro data yields a rather constant pattern until 2006 and presents a slight decrease until 2009. The Gini coefficient from tabulated tax data implies an increase of inequality. The upward trend seems to take place from the early 1990s, being relatively steady in the previous period. The pattern is similar for Gini from tax and HES data for the period 1982-1988. Similarities in the behavior exist for the period 2000-2009 for all cases (with small variations as described previously). The following figures illustrate the results for the estimation of the upper shares of income distribution from tabulated tax data and micro data from HES and EU-SILC. The 10%, 1% , 0,5% and 0,1% top income shares are presented (only the first two cases are available for HES data).

Figure 27. 10% top income shares from various data sources
0.35

0.3

0.25

0.2

0.15

0.1

0.05

0 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

HES_10%

HES2_10%

EU-SILC-10%

TIS_10%

Sources: Authors calculations, Mitrakos and Tsakloglou (2012) (1998), Mitrakos (2007) (2003) Note 1: HES_10%: 10% TIS from HES micro data - Mitrakos and Tsakloglou (2012) (1998), Mitrakos (2003)

15

According to Mitrakos and Tsakloglou (2012) this trend is not supported for the period 2004-2008 from the expenditure distribution

29

Note 2: HES2_10%: 10% TIS from HES micro data - Mitrakos (2007) Note 3: EU SILC_10%: 10% TIS from EU-SILC micro data authors calculations Note 4: TIS_10%: 10% TIS from grouped tax data authors calculations

The top 10% derived from micro HES data is around 30% in 1974, drops drastically in 1982 (24,3%) and then it remains relatively stable for the period 1982-1994 (between 24%-24,3%). A slight increase in 1999 (25,1%) and then a decrease from 2004 onwards (23,2 and 23,3) is detected for the period 1994-2008. In general the trend for the period 1982-2008 is rather constant. Similar is the trend for HES data from Mitrakos (2007) with slightly increased values for the years 1974, 1988, 1994 and 2004. Micro data from EU-SILC indicate a relative constant trend (with successive ups and downs) for the period 2002-2009. The level of 10% top income share is around 26% with lower value in 2003 (25,3%) and higher value in 2006 (27,4%). The top 10% share derived from tabulated tax data [according to Piketty (2001) approach] initiates from a value of 21% and ends up around 26,2%. The level is relatively constant until the late sixties; after this period there is an increase for some years. From the mid 1970s the share declines and is in the level of 21%-22% until the end of 1980s. In the beginning of the next decade the income share of the 10% rises exceeding the initial levels. This trend seems to be interrupted in 20022003. An interesting aspect is that the values between tabulated tax data and micro data from HES and EU-SILC do not yield such differences as in the case of Gini coefficient. The level of 10% top share from HES micro data is higher until 1994 and lower for the remaining period. The corresponding values derived from EU-SILC micro data are in lower level for 2002-2005 and higher for 2006-2009. Moreover, EUSILC values are above HES values both in 2004 and 2008 (years that HES data are available). The following figure illustrate the empirical findings for the 1%, 0,5% and 0,1% of top income shares.

30

Figure 28. TIS 1%-0,5%-0,1% from various data sources

0.09

0.08

0.07

0.06

0.05

0.04

0.03

0.02

0.01

0 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

HES_1%

EU-SILC-1%

EU-SILC-0,5%

EU-SILC-0,1%

TIS_1%

TIS_0,5%

TIS_0,1%

Sources: Authors calculations and Mitrakos (2007) Note 1: HES_1%: 1% TIS from HES micro data - Mitrakos (2007) Note 2: EU SILC_1%-0,5%-0,1%: 1% - 0,5% - 0,1% TIS from EU-SILC micro data authors calculations Note 3: TIS_1%-0,5%-0,1%: 1% - 0,5% - 0,1% TIS from grouped tax data authors calculations

The 1% top share from HES data is 7,8% in 1974 and drops to 5,5% in 1982. It remains virtually unchanged for 1984-1988 (5,4%) and it decrease for the period 1988-2004 (4,5%). EU-SILC data indicate a small decrease from 2002 to 2003 and then a gradual increasing trend which seems to be interrupted in 2008. The top 1% share from tabulated tax data initiates from a value of 7,5% and ends up around 5,65%. The level is relatively constant until the late sixties; after this period a slow but steady decline emerges. This trend remains until the beginning of 1980s; during this decade the top 1% is around 4%. In the beginning of the next decade the income share of the 1% rises without nevertheless reaching the initial levels. This trend seems to be interrupted in 2002-2003. Once again, the values from HES compared to tax data are in higher level for the period 1974-1994. The trend is similar in this period; both empirical findings indicate a decrease from 1974 to 1982 and then a relative constant pattern for 1982-1994. Nevertheless, tax data suggests an increase afterwards while HES data indicate a further decrease. Data from EU-SILC yield a different pattern compared to the tax data for the period 2002-2009 despite the fact that values are quite similar for 20062007 and 2009. The 0,5 % and 0,1% top income shares are available only for tax and EU-SILC data. The pattern differs for 0,5% upper share until 2006 (decrease for tax data and increase for EU-SILC data); 2007 onwards pattern and values are similar.
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The behavior of 0,1% does not differ. Both pattern and values for the period 20062009 are quite comparable.

6. Conclusions This section provides empirical evidence for income inequality in Greece. Various data sources and statistical techniques have been used for the compilation of aggregate and disaggregate measures of income inequality. Furthermore, empirical findings from other studies have been presented and compared. Tabulated tax data for the period 1957-2009 have been utilized for the compilation of aggregate income inequality measures. Tax data provide detailed information on nominal family income and its sources, as reported annually in tax declaration forms. Family income is the sum of income received by the husband and/or wife. This definition also includes single persons. Taking into consideration the issues addressed for the data seven indices have been estimated16: Gini Coefficient (G), Relative Mean Deviation (M), Atkinson Index ( ) (=0,5), Atkinson Index ( ) (=1,5), General Entropy (0) [GE(0) Theils L or Mean Log Deviation) (a=0)], General Entropy (1) [GE(1) Theils T) (a=1)] and General Entropy (2) [GE(2) monotonic transformation of Coefficient of Variation CV) (a=2)]. According to the empirical findings, six indices indicate an increase of income inequality while one (GE (2)) indicates the opposite (decrease). The mathematical results are similar to previous studies [Livada (1988), Livada (1991), Livada and Tsakloglou (1993), Dimelis and Livada (1994)], but the conclusions differ due to the quite different reference period. The OLS models with correction term AR(1) do not face significant issues with autocorrelation and heteroscedascicity. All summary inequality measures, except GE(2), indicate an upward trend for the period 19572009, whereas GE(2) indicate a decline followed by an increase (explaining thus the quadratic model of description). Nevertheless, the value of GE(2) never reached its initial level. Our results were compared with data from Standardized World Income Inequality Database (SWIID) compiled by Solt (2009). It should be noted that the results are not totally comparable since the data sources and the methodology differs and the substantial existing inconsistencies should be taken into consideration. The comparison of Gini s estimates for Greece is conducted with two country groups. The first group consists of South European countries such as Italy, Spain, Portugal and France (although France could be considered part of Central Europe). The second group includes countries from Central and North Europe (Germany, Switzerland,
16

Interpolation techniques according to Cowell and Mehta (1982) were applied in order to tackle the issue of grouped data

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Netherlands and Sweden) as well as UK and USA. The broader conclusion could be that after the mid 1990s aggregate income inequality in Greece is in high levels compared with other countries, while it was a medium case in the previous period. Another data source is the European Union Survey on Income and Living Conditions (EU SILC). This survey includes micro data on income on household and personal level that can be used for the estimation of income distribution. EU SILC data contain information for various components of income. Therefore, several variables that approach the concept of income have been calculated. These variables have been utilized to estimate the distribution of income in the whole population. Eighteen (18) variables were compiled. The most appropriate - according to the topic - have been used for income inequality analysis. The variable used for the estimation of income distribution is the Total net household income_ no negative PY050N (HY010net_nn). It has been adjusted for the size of household and the age of the members of household with the OECD-modified scale. This scale, first proposed by Haagenars et al. (1994), assigns a value of 1 to the household head, of 0.5 to each additional adult member and of 0.3 to each child. The time period of the analysis is from the year 2002 to the year 2009. According to the empirical results, the average income illustrates an increasing trend, departing from 9.756 in 2002 and resulting in 13.503 in 2009. The level of 2009 is not lower compared to the corresponding one of 2008, but the trend of the increase is considerably less intense since Greece had already entered recession. The 10% income share yields approximately 26% of the generated income, while the lower 10% is recipient of approximately 2,5% of income. The indices that indicate the gap between the income shares of certain portions of population are S80/S20 and S90/S10, which is simply the ratio between the income share of upper and lower income classes. There has been a small decrease in both indices; nevertheless the trend is not stable for the whole period. The decrease is more obvious in the year 2009 especially for S90/S10. This implies that the recession, which is more apparent from 2009, seems to affect more the upper income classes. Nevertheless, since no data are available for the rest period of economic crisis this aspect is under scrutiny. The behavior of the aggregate inequality indices (GINI, Atkinson_0,5, Atkinson_1,5, General Entropy_0, General Entropy_1, General Entropy_2 and Coefficient of Variation) is rather stable with miniscule decline. In all cases the absolute values are slightly changing in both directions (increase or decrease); nevertheless, in all cases a small decrease is noted from 2008 to 2009. This element, also, implies a miniscule decline in inequality in the beginning of economic recession in Greece. Though, due to the absence of data for the rest of the period of economic crisis no firm conclusions can be drawn. The variable used for the estimation of income distribution is slightly different in interpretation and in compilation procedure from the corresponding one (Total disposable household income (HY020)) used by ELSTAT, since it incorporates the net components of household income without taking into account negative values for net cash benefits or losses from self-employment (including royalties). The later is
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used in the international comparison for consistency reasons17, even though the impact of the excluded element is minuscule. The ratio S80/S20 and Gini coefficient for total disposable household income for Greece and European Union 2718 and Euro Area 1719 are compared. The reason for the sort period for comparison is due to the lack of data for European averages. The empirical findings indicate that aggregate income inequality in Greece is in higher level than the average of both European Union and Euro area. Furthermore analytical results for the year 2009 for the ratio S80/S20 and Gini coefficient are presented. In both cases Greece yield lower aggregate income inequality only from Lithuania, Spain, Latvia, Romania and Bulgaria, whereas inequality is higher in Portugal, Ireland and United Kingdom according to Gini and lower (Portugal is the same) according to S80/S20 ratio. In any case Greece seems to suffer from intense aggregate income inequality for the European standards. Empirical findings from studies that utilize Household Expenditure Survey (HES) and European Community Household Panel (ECHP) micro data are, also, presented. In both cases income data are used20. Despite the differences (data sources, methodological differences such as compilation procedure, unit reference/equivalence scale, definition of income) a comparison was conducted for empirical findings; specifically for the Gini coefficient and the top income shares. The Gini coefficient derived from tabulated tax data is in higher level in all cases. As expected Gini from HES micro data yields the smaller values, since it includes non cash components. Data from HES with no imputed personal income result in higher values of the coefficient. The coefficient is both lower (1994) and higher (1999) compared with the corresponding one from ECHP data. Furthermore, Gini is higher (compared to HES in 2004 and 2008) when is derived from EU-SILC micro data. Apart from the level, the behavior of the coefficient is important. According to HES data, there is an impressive decrease from 1974 to 1982. For the period 1982-1999 the level of the income inequality does not alter significantly. On the contrary a decreasing trend exists for the period 1999-200821. The trend is similar for HES data when imputed personal income is not included for the period 1994-2008. Micro data
17 18

Small differences exist between ELSTAT and Eurostat data (see section 3.4) The European Union (EU27) consists of 27 Member States: Belgium, Bulgaria, the Czech Republic, Denmark, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, the Netherlands, Austria, Poland, Portugal, Romania, Slovenia, Slovakia, Finland, Sweden and the United Kingdom plus the European Central Bank and the EU institutions. 19 The euro area (EA17) consists of 17 Member States: Belgium, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia, Slovakia and Finland plus the European Central Bank. 20 Mitrakos and Tsakloglou (2012) compile, also, the distribution of consumption expenditures and they state that income information from HES is considered less reliable from ELSTAT. Nevertheless the conclusions do not differ substantially using the two distributions. Other researchers utilize only consumption data [Sarris and Zografakis (2000)]. 21 According to Mitrakos and Tsakloglou (2012) this trend is not supported for the period 2004-2008 from the expenditure distribution

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from ECHP indicate a relative constant trend for the period 1994-2001. The coefficient derived from EU-SILC micro data yields a rather constant pattern until 2006 and presents a slight decrease until 2009. The Gini coefficient from tabulated tax data implies an increase of inequality. The upward trend seems to take place from the early 1990s, being relatively steady in the previous period. The pattern is similar for Gini from tax and HES data for the period 1982-1988. Similarities in the behavior exist for the period 2000-2009 for all cases (with small variations as described previously). An interesting aspect is that the values of top income shares between tabulated tax data and micro data from HES and EU-SILC do not yield such differences as in the case of Gini coefficient. The pattern of tax and HES data is rather similar for the period 1974-1994, with the values in the latter case being in higher level; the trend, nevertheless differs in the remaining period. The trend for tax and EU-SILC data is not the same for the limited years both data exist, but in the latter years (after 2006) the estimates are quite similar. To sum up we could say that empirical evidence from tabulated tax data indicates an increase on aggregate income inequality. This view is not supported by estimates derived from other data sources (i.e. HES). The level of aggregate inequality differs from other empirical results. These findings imply that different data sources and/or methodological approaches could lead to different conclusions for the direction and/or level of aggregate income inequality. Finally top income shares yield similar trend (for certain periods) and level (to the possible extend) regardless the data sources. This view is consistent with Leigh (2007) that top income shares may be a useful substitute for other measures of inequality.

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