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Accounting for income distribution trends: A density function decomposition approach

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Stephen Jenkins ()
Philippe Kerm ()

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Abstract

This paper develops methods for decomposing changes in the income distribution using subgroup decompositions of the income density function. Overall changes are related to changes in subgroup shares and changes in subgroup densities, where the latter are broken down further using elementary transformations of individual incomes. These density decompositions are analogous to the widely-used decompositions of inequality indices by population subgroup, except that they summarize multiple features of the income distribution (using graphs), rather than focusing on a specific feature such as dispersion, and are not dependent on the choice of a specific summary index. Nonetheless, since inequality and poverty indices can be expressed as PDF functionals, our density-based methods can also be used to provide numerical decompositions of these. An application of the methods reveals the multi-faceted nature of UK income distribution trends during the 1980s. Copyright Springer 2005

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File URL: http://hdl.handle.net/10.1007/s10888-004-8309-1
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Publisher Info
Article provided by Springer in its journal The Journal of Economic Inequality.

Volume (Year): 3 (2005)
Issue (Month): 1 (April)
Pages: 43-61
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Handle: RePEc:kap:jecinq:v:3:y:2005:i:1:p:43-61

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Web page: http://springerlink.metapress.com/link.asp?id=111137

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Keywords: density functions income distribution inequality subgroup decompositions

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Cowell, F.A., 2000. "Measurement of inequality," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 2, pages 87-166 Elsevier. [Downloadable!] (restricted)
  2. Mookherjee, Dilip & Shorrocks, Anthony F, 1982. "A Decomposition Analysis of the Trend in UK Income Inequality," Economic Journal, Royal Economic Society, vol. 92(368), pages 886-902, December. [Downloadable!] (restricted)
  3. Philippe Van Kerm, 2003. "Adaptive kernel density estimation," Stata Journal, StataCorp LP, vol. 3(2), pages 148-156, June. [Downloadable!]
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  4. Mary C. Daly & Robert G. Valletta, 2000. "Inequality and poverty in the United States: the effects of changing family behavior and rising wage dispersion," Working Papers in Applied Economic Theory 2000-06, Federal Reserve Bank of San Francisco. [Downloadable!]
  5. Shorrocks, Anthony F, 1984. "Inequality Decomposition by Population Subgroups," Econometrica, Econometric Society, vol. 52(6), pages 1369-85, November. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Dean Hyslop & Suresh Yahanpath, 2005. "Income Growth and Earnings Variations in New Zealand, 1998—2004," Treasury Working Paper Series 05/11, New Zealand Treasury. [Downloadable!]
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