By Francesco Savoia, Research Fellow, Università degli Studi di Milano, Ioannis Bournakis, Associate professor, SKEMA Business School, Mona Said, Professor, The American University in Cairo, and Antonio Savoia, Reader, University of Manchester; Nonresident Senior Fellow, UNU-WIDER
The inclusion of income redistribution in the UN Sustainable Development Goals, as part of SDG Goal 10 aiming to reduce inequality within and among countries, reflects an increasing realisation that addressing inequalities is intrinsically important, as well as instrumental to human development and to a number of other development outcomes through a variety of channels. But how should we measure and monitor progress in reducing inequalities? Here we argue that looking at the sub-national level may be important.
Income distribution and SDG Goal 10
SDG Goal 10 faces criticism for focusing on narrow aspects of income distribution, largely encapsulated in the first two targets. Target 10.1 aims to achieve a form of growth with equity, where progress is measured by how gains from economic growth are shared among the poorest 40% of the population. Target 10.2 focuses on socio-economic inclusion and is measured by the share of the population living below 50% of the median income.
Progress on SDG10 offers both reasons for optimism and concern. The 2023 Sustainable Development Goals Report by the UN suggests that, while several forms of inequality persisted, the incomes of the poorest were rising faster than the national average in many countries. However, the effects of the COVID-19 pandemic appear to be reversing this earlier trend, increasing the risk that those with relatively low incomes may fall further behind.
One aspect the debate has not emphasised enough so far is how income is distributed at the subnational level, for example, within regions. This matters, as progress in reducing inequality within countries can only be partially successful if a country presents large regional variations, with very unequal regions coexisting alongside relatively more equal ones.
Inequality at national level vs. inequality within regions
To illustrate this, we draw on evidence from our forthcoming journal article on income distribution in Egypt during 1999-2015, comparing national-level inequality with regional-level inequality. When looking at national level, income inequality in Egypt appears to be moderate and relatively stable (Table 1).
Table 1 – National level income inequality in Egypt during 1999-2015
| Year | Gini Index | Bottom 40% | Share of pop. Living below 50% of median income |
| 1999 | 0.31 | 22.18 | 4.48 |
| 2004 | 0.31 | 21.92 | 6.00 |
| 2008 | 0.30 | 22.62 | 5.35 |
| 2010 | 0.29 | 22.85 | 5.49 |
| 2012 | 0.28 | 23.33 | 4.98 |
| 2015 | 0.31 | 22.22 | 5.05 |
Notes: Variables are based on equivalised disposable household income, using ERF-LIS data. Source: Savoia F. Bournakis I., Said M., Savoia A. (2023) “Regional Income Inequality in Egypt: Evolution and Implications for Sustainable Development Goal 10”, Oxford Development Studies, DOI: 10.1080/13600818.2023.2225429.
Now, compare inequality measures for Egypt at national level with regional-level inequality, i.e., inequality measured within each Egyptian Governorate. This tells us a rather different story (Figure 1).
Figure 1 – Income inequality within Egyptian Governorates: 1999–2015
Notes: Variables are based on equivalised disposable household income, using ERF-LIS data. Poverty rate indicates the share of population living below 50% of median income. Source: Savoia F. Bournakis I., Said M., Savoia A. (2023) “Regional Income Inequality in Egypt: Evolution and Implications for Sustainable Development Goal 10”, Oxford Development Studies, DOI: 10.1080/13600818.2023.2225429.
First, inequality within regions varies, meaning that individuals may live in relatively equal or rather unequal places. Compare, for example, the Cairo and Sharkia Governorates. According to the Gini index, Cairo displays the highest levels of income inequality (about 0.40 in 2015). In contrast, Sharkia has one of the lowest levels of income inequality (with the Gini index ranging between 0.21 and 0.24) during 1999-2015.
Second, income inequality within regions has generally increased. And the increase tended to be greater in less unequal regions, implying that they are moving towards the level of inequality of more unequal regions.
Third, many regions have seen a decrease in the income share of the bottom 40% and an increase in the proportion of people living below 50% of median income. Hence, geographically diffused progress on the first two targets of SDG 10 depends on reversing thesetrends.
Finally, inequality within regions is a prominent source of income inequality. A simple decomposition exercise by population subgroups based on their geographical location shows that within-region inequality explains most of the overall income inequality. For example, in 2015, the within component (or intra-regional inequality) amounts to 90.8% of the total, whereas the between component (or inter-regional inequality) accounts for the remaining 9.2%.
Implications
The Egyptian case implies that measuring and monitoring income inequality at the subnational level matters. Looking at the national level picture alone, we would have concluded that income inequality was moderate and stable, while the subnational level picture suggests that Egyptians can live in relatively equal Governorates or rather unequal ones. And this is important to assess if progress in reducing inequalities is geographically diffused.
SDG Goal 10 aside, how income is distributed at regional level is also important because a significant part of individuals’ experiences of economic inequality may happen at the “local level”. This affects political and social attitudes and behaviour and, in turn, individuals’ wellbeing. Seen from this perspective, the lens of regional-level inequality may contribute to explain the “Arab inequality puzzle”, i.e., the disconnect between the apparently low and stable national-level inequality recorded in societies of the Arab World and the popular perception of high inequality leading to the revolts of the Arab Spring in 2010-2011. Increasing regional inequality, which occurred in both relatively equal and unequal regions in Egypt, may be at the root of such popular perception. This would be consistent with the hypothesis that inequality may have fuelled, among other things, the political uprisings of the Arab Spring.