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Regression-based Inequality Decomposition: Pitfalls and a Solution Procedure

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  • Guanghua Wan

Abstract

This paper explores pitfalls in regression-based inequality decompositions. A simple procedure is developed for rectifying these pitfalls. The procedure does not impose any restrictions on the underlying regression model and it can be applied to any inequality measure(s). Once combined with conventional decomposition methods or the Shapley value approach of Shorrocks (1999), what is being proposed becomes a most general and powerful framework for regression-based in equality decomposition.

Suggested Citation

  • Guanghua Wan, 2002. "Regression-based Inequality Decomposition: Pitfalls and a Solution Procedure," WIDER Working Paper Series DP2002-101, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:dp2002-101
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    File URL: https://www.wider.unu.edu/sites/default/files/dp2002-101.pdf
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    References listed on IDEAS

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