Spatial‑temporal determinants of income inequality in the cantons of Ecuador between 2010 and 2019: a spatial panel econometric analysis

Abstract

Inequality is a problem that remains latent throughout generations, despite the growth of countries and the mechanisms that were implemented to mitigate it. Understanding the structure of spillovers from a spatial point of view would allow for the management of current resources, with the aim of improving the distribution among individuals at the cantonal level for Ecuador. In this context, this study aims to estimate the effect of the determinants of income inequality at the cantonal level, through the use of spatial models during the period 2010–2019, for 213 cantons in Ecuador. The Kuznets inverted-U theory is applied, which allows us to understand the changes that economic growth produces on income inequality levels. The approach indicates that the current average rate of growth of production per capita has made inequality levels decrease. In addition, human capital has the opposite effect to that expected, increasing inequality levels as a result of a concentration of this resource in certain cantons. On the other hand, the entrepreneurial structure of micro and small enterprises allows to mitigate the inequality levels between cantons. In this sense, among the policy objectives is to prioritize a more homogeneous growth of the cantons of Ecuador, likewise, generate policies that allow reducing the concentration of human capital in certain regions, as well as financial development. On the other hand, it is important to strengthen the prevalence of Micro, small and medium-sized enterprises in the long term, with the aim of improving family income levels and reducing inequality.