I discuss how poverty decomposition methods relate to integral approximation, which is the foundation of decomposition of the temporal change of a quantity into key drivers. This offers a common framework for the different decomposition methods used in the literature, clarifies their often somewhat unclear theoretical underpinning and identifies the methods' shortcomings. In light of integral approximation, many methods actually lack a sound theoretical basis and they usually have an ad-hoc character in assigning the residual terms to the different key effects. I illustrate these claims for the Shapley-value decomposition and methods related to the Datt-Ravallion approach and point out difficulties in axiomatic approaches to poverty decomposition. Recent developments in energy and pollutant decomposition offer some promising methods, but ultimately, further development of poverty decomposition should account for the basis in integral approximation.
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Paper provided by Göteborg University, Department of Economics in its series Working Papers in Economics with number
217.
Length: 18 pages Date of creation: 31 Aug 2006 Date of revision:
17 Nov 2008 Handle: RePEc:hhs:gunwpe:0217
Contact details of provider: Postal: Department of Economics, School of Business, Economics and Law, Göteborg University Box 640, SE 405 30 GÖTEBORG, Sweden Phone: 031-773 10 00 Web page: http://www.handels.gu.se/econ/ More information through EDIRC
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Find related papers by JEL classification: C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation I32 - Health, Education, and Welfare - - Welfare and Poverty - - - Measurement and Analysis of Poverty
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