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Understanding Inequality Trends:Microsimulation Decomposition for Italy

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  • Carlo V. Fiorio

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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File URL: http://sticerd.lse.ac.uk/dps/darp/DARP78.pdf
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Bibliographic Info

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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Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp

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

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  1. John DiNardo & Nicole M. Fortin & Thomas Lemieux, 1995. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," NBER Working Papers 5093, National Bureau of Economic Research, Inc.
  2. Shorrocks, Anthony F, 1984. "Inequality Decomposition by Population Subgroups," Econometrica, Econometric Society, vol. 52(6), pages 1369-85, November.
  3. 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.
  4. Mary C. Daly & Robert G. Valletta, 2006. "Inequality and Poverty in United States: The Effects of Rising Dispersion of Men's Earnings and Changing Family Behaviour," Economica, London School of Economics and Political Science, vol. 73(289), pages 75-98, 02.
  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).
  6. 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 and International Relations Area.
  7. Jonathan Morduch & Terry Sicular, 1998. "Rethinking Inequality Decomposition, with Evidence from Rural China," Harvard Institute of Economic Research Working Papers 1831, Harvard - Institute of Economic Research.
  8. Frank Cowell & Stephen P Jenkins, 2000. "Estimating welfare indices : household weights and sample design," LSE Research Online Documents on Economics 2160, London School of Economics and Political Science, LSE Library.
  9. repec:ese:iserwp:2003-11 is not listed on IDEAS
  10. Bourguignon, Francois & Fournier, M & Gurgand, M, 2001. "Fast Development with a Stable Income Distribution: Taiwan, 1979-94," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 47(2), pages 139-63, June.
  11. 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.
  12. 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 and International Relations Area.
  13. Bourguignon, Francois, 1979. "Decomposable Income Inequality Measures," Econometrica, Econometric Society, vol. 47(4), pages 901-20, July.
  14. F. Chantreuil & A. Trannoy, 1999. "Inequality decomposition values : the trade-off between marginality and consistency," THEMA Working Papers 99-24, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  15. Marco Manacorda, 2004. "Can the Scala Mobile Explain the Fall and Rise of Earnings Inequality in Italy? A Semiparametric Analysis, 19771993," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 585-614, July.
  16. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
  17. Cowell, Frank A., 1989. "Sampling variance and decomposable inequality measures," Journal of Econometrics, Elsevier, vol. 42(1), pages 27-41, September.
  18. Cowell, Frank A, 1980. "On the Structure of Additive Inequality Measures," Review of Economic Studies, Wiley Blackwell, vol. 47(3), pages 521-31, April.
  19. 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.
  20. Jenkins, Stephen P, 1995. "Accounting for Inequality Trends: Decomposition Analyses for the UK, 1971-86," Economica, London School of Economics and Political Science, vol. 62(245), pages 29-63, February.
  21. 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.
  22. Shorrocks, A F, 1980. "The Class of Additively Decomposable Inequality Measures," Econometrica, Econometric Society, vol. 48(3), pages 613-25, April.
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Cited by:
  1. Muller, Adrian, 2006. "Clarifying Poverty Decomposition," Working Papers in Economics 217, University of Gothenburg, Department of Economics, revised 17 Nov 2008.

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