| 18.4 Regional disposable income of private households as a % of primary income: Asia, Europe and Oceania, 2007 |
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| 18.5 Regional disposable income of private households as a % of primary income: Americas, 2007 |
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The disposable income of households can be seen as the maximum amount that a unit can afford to spend on consumption goods or services without having to reduce its financial or non-financial assets or by increasing its liabilities. As such, it is a better indicator of the material well-being of citizens than gross domestic product (GDP) per inhabitant. Regions where net commuter flows are high may display a very high GDP per capita which does not translate into a correspondingly high income for their inhabitants (the most notable case is London in the United Kingdom).
Regional income per capita disparities within countries are generally smaller than GDP per capita disparities. Still, in 2007 per capita income in the District of Colombia (United States) was 80% higher than the country median income and in the bottom income state, Mississippi, per capita income was roughly equivalent to the income of the median American in 1995. Similarly, in Chile, the Slovak Republic, Australia, Canada and Hungary, inhabitants in the top income region were 40% richer than the median citizen (Figure 18.1).
In the decade prior to 2007, household income growth has occurred with large regional variation both in countries displaying sustained growth, such as Hungary and the Slovak Republic and in countries with limited income growth, such as Chile and Germany (Figure 18.2).
While the regional range measures the distance between the richest and the poorest regions in a country, the Gini index of household disposable income provides a measure of disparities among all regions. According to this index, the Slovak Republic, Italy, Chile and Greece were the OECD countries with the highest inequalities in 2007. Among them, inequalities have grown in the Slovak Republic and Greece between 1995 and 2007. From 1996 to 2007 inequalities have decreased the most in Chile, New Zealand and Finland (Figure 18.3).
A comparison between the regional household disposable income and the primary income (income generated primarily by market transactions) provides a measure of the levelling role of state intervention. Current transfers to households significantly reduce the difference between the highest and lowest regional values; sizable effects on the relative income level of regions (ratio between disposable income and primary income larger than 1), are found mostly in West Virginia, Tennessee, Mississippi and Kentucky (United States); Lubelskie and -Swietokrzyskie (Poland); and Calabria (Italy) (Figure 18.4-18.6).
Definition
The primary income of private households is defined as the income generated directly from market transactions, i.e. the purchase and sale of factors of production and goods. These include in particular the compensation of employees. Private households can also receive income on assets (interest, dividends and rents) and from operating surplus and self-employment. Interest and rents payable are recorded as negative items for households.
The disposable income of private households is derived from the balance of primary income by adding all current transfers from the government, except social transfers in kind and subtracting current transfers from the households such as income taxes, regular taxes on wealth, regular inter-household cash transfers and social contributions.
To make comparisons over time and across countries, regional disposable income is expressed at constant prices (year 2000), computing the deflator from the OECD national final consumption expenditure of households in current and constant prices; then it is converted into USD purchasing power parities (PPPs) for private consumption to express each country's income in a common currency.
The Gini index is a measure of inequality among all regions of a given country (see Annex C for the formula). The index takes on values between 0 and 1, with zero interpreted as no disparity. It assigns equal weight to each region regardless of its size; therefore differences in the values of the index among countries may be partially due to differences in the average size of regions in each country.
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Source
OECD Regional Database: http://dotstat/wbos/.
OECD National Final Consumption Expenditure of Households.
See Annex B for data, source and country-related metadata.
Reference years and territorial level
1996-2007; TL2.
Regional data are not available in Iceland, Korea, Mexico, -Portugal, Switzerland and Turkey.
Figure notes
18.1: As a % of country median disposable income per capita.
18.1-18.3: Disposable income in constant (2000) PPP USD. Chile latest available year 2006. First available year New Zealand 1998, Denmark and Hungary 2000.
18.3: Measurement gap:
Regional disposable income in OECD countries:
The disposable income of households does not take into account social transfer in kind to households. A preferable measure of material condition of households at regional level could be the adjusted disposable income which additionally reallocates income from government and non-profit institutions serving the households, through expenditure on individual goods and services such as health, education and social housing (in-kind expenditure). Interregional disparities of adjusted household income could shed a light on possible areas of social exclusion, material deprivation and lack of access to essential services.
18.5: No regional primary income available in Mexico
Information on data for Israel: http://dx.doi.org/10.1787/888932315602.
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| Indicator in PDF |
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| 18.1 TL2 regional range in household income per capita, as a % of income in the country's median region, 2007 |
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| 18.2 Countries ranked by size of difference in TL2 regional annual household income growth, 1996-2007 |
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| 18.3 Gini index of TL2 regional disposable income, 1996 and 2007 |
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