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Factor decomposition of cross-country income inequality with interaction effects

Author

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  • Bruno Bracalente
  • Cristiano Perugini

Abstract

In this paper we propose a decomposition of the Theil measures of per capita income inequality which accounts for interaction effects between its multiplicative factors. Our theoretical findings, supported by an empirical application referring to EU-25 countries, suggest that neglecting these effects may strongly bias the relative importance of some factors, with consequent misleading policy implications.

Suggested Citation

  • Bruno Bracalente & Cristiano Perugini, 2008. "Factor decomposition of cross-country income inequality with interaction effects," Quaderni del Dipartimento di Economia, Finanza e Statistica 54/2008, Università di Perugia, Dipartimento Economia.
    • Handle: RePEc:pia:wpaper:54/2008
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    File URL: http://www2.ec.unipg.it/quaderni/qd54web.pdf
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    Citations

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    Cited by:

    1. Damiani, Mirella & Pompei, Fabrizio & Ricci, Andrea, 2011. "Temporary job protection and productivity growth in EU economies," MPRA Paper 29698, University Library of Munich, Germany.
    2. Silvia Micheli, 2010. "Learning Curve and Wind Power," Quaderni del Dipartimento di Economia, Finanza e Statistica 81/2010, Università di Perugia, Dipartimento Economia.
    3. Francesco Venturini, 2011. "Product variety, product quality, and evidence of Schumpeterian endogenous growth: a note," Quaderni del Dipartimento di Economia, Finanza e Statistica 93/2011, Università di Perugia, Dipartimento Economia.
    4. Stefano Herzel & Marco Nicolosi & Cătălin Stărică, 2012. "The cost of sustainability in optimal portfolio decisions," The European Journal of Finance, Taylor & Francis Journals, vol. 18(3-4), pages 333-349, May.
    5. Bruno Bracalente & Cristiano Perugini, 2010. "The components of regional disparities in Europe," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 44(3), pages 621-645, June.
    6. Mirella Damiani, 2010. "Labour regulation, corporate governance and varieties of capitalism," Quaderni del Dipartimento di Economia, Finanza e Statistica 76/2010, Università di Perugia, Dipartimento Economia.
    7. Davide Castellani & Fabio Pieri, 2011. "Foreign Investments and Productivity Evidence from European Regions," Quaderni del Dipartimento di Economia, Finanza e Statistica 83/2011, Università di Perugia, Dipartimento Economia.

    More about this item

    Keywords

    Inequality; Decomposition; Interaction Effects;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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