Measuring Regional Inequality in the Andean Countries: A Multiple-Stage Nested Theil Decomposition Using Night Light Emissions

Abstract

This paper examines inequality in the Andean countries using satellite-recorded nighttime lights and gridded population datasets from 2012 to 2021. We follow a multiple-stage nested Theil index decomposition method accounting for each country's lowest administrative divisions to enhance our understanding of how spatial dimensions contribute as primary sources of inequality and how these contributions vary across each country. The main findings reveal a decrease in overall inequality for the Andean region throughout the period (primarily driven by a decline in between-country inequality) and an increase in the relative importance of within-country inequality. In addition, there are spatial heterogeneities by country. Bolivia, Colombia, and Peru experienced a decline in wealth inequality over the past decade due to decreased disparities between provinces and less inequality within departments and provinces, respectively. In contrast, the inequality components in Ecuador and Venezuela exhibit a more balanced contribution to overall inequality. And, while Ecuador does not show a significant change in overall inequality during the period, the inequality increase in Venezuela is primarily driven by changes in the disparity between all geographic subgroups.