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Understanding Inequality Trends:Microsimulation Decomposition for Italy

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Author Info
Carlo V. Fiorio

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Abstract

This paper suggests overcoming some limitations of traditional inequalitydecomposition methods by developing a combination of Burtless (1999) and DiNardoet al. (1996), two different microsimulation methods for decomposing inequality. Byusing this combination it is possible to take into consideration the dispersion ofincome sources as well as the socio-demographic evolution of the population understudy, in a single framework and across many years. This methodology maximizesclarity of results and allows one to easily perform tests on results. An application toItalian household inequality is provided to analyze marginal and joint effects ofdemographic trends and changed dispersion of different income factors between 1977and 2002.

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Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Distributional Analysis Research Programme Papers with number 78.

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Date of creation: Feb 2006
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Handle: RePEc:cep:stidar:78

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Related research
Keywords: Microsimulation; counterfactual analysis; household inequality trend; inequality decomposition.;

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Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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  1. Giovanni D'Alessio & Luigi Federico Signorini, 2000. "Disuguaglianza dei redditi individuali e ruolo della famiglia in Italia," Temi di discussione (Economic working papers) 390, Bank of Italy, Economic Research Department. [Downloadable!]
  2. Shorrocks, A F, 1980. "The Class of Additively Decomposable Inequality Measures," Econometrica, Econometric Society, vol. 48(3), pages 613-25, April. [Downloadable!] (restricted)
  3. Cowell, Frank A, 1980. "On the Structure of Additive Inequality Measures," Review of Economic Studies, Blackwell Publishing, vol. 47(3), pages 521-31, April. [Downloadable!] (restricted)
  4. Burtless, Gary, 1999. "Effects of growing wage disparities and changing family composition on the U.S. income distribution," European Economic Review, Elsevier, vol. 43(4-6), pages 853-865, April. [Downloadable!] (restricted)
  5. Biewen, Martin & Jenkins, Stephen P., 2003. "Estimation of Generalized Entropy and Atkinson Inequality Indices from Complex Survey Data," IZA Discussion Papers 763, Institute for the Study of Labor (IZA). [Downloadable!]
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  6. Cowell, Frank A., 1989. "Sampling variance and decomposable inequality measures," Journal of Econometrics, Elsevier, vol. 42(1), pages 27-41, September. [Downloadable!] (restricted)
  7. Pyatt, Graham & Chen, Chau-nan & Fei, John, 1980. "The Distribution of Income by Factor Components," The Quarterly Journal of Economics, MIT Press, vol. 95(3), pages 451-73, November. [Downloadable!] (restricted)
  8. Bourguignon, Francois, 1979. "Decomposable Income Inequality Measures," Econometrica, Econometric Society, vol. 47(4), pages 901-20, July. [Downloadable!] (restricted)
  9. Fei, John C H & Rainis, Gustav & Kuo, Shirley W Y, 1978. "Growth and the Family Distribution of Income by Factor Components," The Quarterly Journal of Economics, MIT Press, vol. 92(1), pages 17-53, February. [Downloadable!] (restricted)
  10. Frank A. Cowell & Stephen P. Jenkins, 2000. "Estimating Welfare Indices: Household Weights and Sample Design," Discussion Papers of DIW Berlin 219, DIW Berlin, German Institute for Economic Research. [Downloadable!]
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  11. Jonathan Morduch & Terry Sicular, 2002. "Rethinking Inequality Decomposition, With Evidence from Rural China," Economic Journal, Royal Economic Society, vol. 112(476), pages 93-106, January. [Downloadable!] (restricted)
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  12. Chantreuil, F. & Trannoy, A., 1999. "Inequality Decomposition Values: the Trade-Off Between Marginality and Consistency," Papers 99-24, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
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  13. Shorrocks, Anthony F, 1984. "Inequality Decomposition by Population Subgroups," Econometrica, Econometric Society, vol. 52(6), pages 1369-85, November. [Downloadable!] (restricted)
  14. Christopher L. Erikson & Andrea Ichino, 1994. "Wage Differentials in Italy: Market Forces, Institutions, and Inflation," NBER Working Papers 4922, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Andrea Brandolini, 1999. "The Distribution of Personal Income in Post-War Italy: Source Description, Data Quality, and the Time Pattern of Income Inequality," Temi di discussione (Economic working papers) 350, Bank of Italy, Economic Research Department. [Downloadable!]
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  16. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January. [Downloadable!] (restricted)
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  1. Muller, Adrian, 2006. "Clarifying Poverty Decomposition," Working Papers in Economics 217, Göteborg University, Department of Economics, revised 17 Nov 2008. [Downloadable!]
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