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Multilevel Decomposition Methods For Income Inequality Measures

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  • KAZUHIKO KAKAMU
  • MOTOTSUGU FUKUSHIGE

Abstract

This paper studies the multilevel decomposability of the respective income inequality measures proposed by Theil, Rao and Bahattacharya–Maharanobis. All the methods can be decomposed into multilevels if and only if each lower level subgroup belongs to only one particular higher level group. We found not only analytically but also empirically that the residual in the decomposed Bahattacharya–Maharanobis measure tends to increase when the decomposition levels increase. We conclude that Theil's and Rao's decompositions have advantages in empirical analysis and that the choice of the decomposition methods depends on the purpose of the analysis.

Suggested Citation

  • Kazuhiko Kakamu & Mototsugu Fukushige, 2009. "Multilevel Decomposition Methods For Income Inequality Measures," The Japanese Economic Review, Japanese Economic Association, vol. 60(3), pages 333-344, September.
    • Handle: RePEc:bla:jecrev:v:60:y:2009:i:3:p:333-344
    DOI: 10.1111/j.1468-5876.2008.00447.x
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    Cited by:

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    2. Conrad Kobel & Engelbert Theurl, 2013. "Hospital specialisation within a DRG-Framework: The Austrian Case," Working Papers 2013-06, Faculty of Economics and Statistics, Universität Innsbruck.
    3. D'Amico, Guglielmo & Di Biase, Giuseppe & Manca, Raimondo, 2014. "Decomposition Of The Population Dynamic Theil'S Entropy And Its Application To Four European Countries," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 55(2), pages 229-239, December.
    4. Guglielmo D’Amico & Giuseppe Di Biase & Raimondo Manca, 2015. "Measuring Income Inequality: An Application Of The Population Dynamic Theil'S Entropy," Accounting & Taxation, The Institute for Business and Finance Research, vol. 7(1), pages 103-114.

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