New measure and thresholds for inequality and its link with social conflict

Abstract

This paper develops an alternative methodology to analyze income inequality and its structure. The proposed approach allows us, among other things, to classify individuals into income groups endogenously. This classification of income groups will be used to study the structure of inequality and to find a relation between inequality and conflict and social unrest.

This approach is applied to Spanish income data from the Income and Living Conditions survey (SILC) conducted by the INE. We refer to the years 2005, 2007, 2009 and 2011 with the aim of evaluating the impact of the economic crisis. The empirical results show an increase in inequality and a decrease in the share of total income of households classified as poor, lower middle class and middle class. On the contrary, the households located at the right end of the income distribution scale have improved. This fact leads to a more unstable society and one prone to conflict.