(DP 1974-11) Income Distribution in the Philippines: The Employed and the Self-employed

Abstract

Using cross-section data from the 1968 National Demographic Survey, this paper gives quantitative estimates of the relative contributions of various factors (education, occupation, etc.) to income inequality among heads of families, measuring inequality by the variance of income logarithms. Particular attention is given to the characteristics of the self-employed (more than 40% of the total) as distinguished from the employed. Not unexpectedly, mean income is lower but variance significantly larger for the self-employed. For both groups, education is the single most important variable explaining income variation, and expecting college graduates, the self-employed earn less at every education level. For the aggregate, other factors following education in order of importance are: occupation, geographical region of residence, sex, sector of employment, amount of working time, age and class of worker (whether employed or self-employed). Considering that little can be done over the medium-term in regard to most of these factors, the suggestion made is that it might be useful to effect institutional changes that combine self-employed workers into more efficient groupings in order (among other things) to reduce income inequality.