Changes in earnings distribution in Peru: 2004-2014

This thesis explores the changes in earnings distribution among heads of household in Peru from 2004 to 2014 by applying Dinardo, Fortin, and Lemieux's methodology of counterfactual distributions and decompositions. Various measures indicate that earnings inequality among heads of household reduced from 2004 to 2014 and I find that the shift occurred primarily because of the endowment effect, or the changes in characteristics of the heads of household. I consequently find that the returns effect had a minimal effect on the earnings distribution. I conclude that an increase in education level, change in conjugal status, and a higher rate of women heads of household are the main causal actors behind the reduction in inequality.