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Comment: On the Interpretation (and Misinterpretation) of Inequality Decompositions by Income Sources

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  • Kimhi, Ayal

Abstract

This paper discusses interpretations of different inequality decomposition rules when inequality is decomposed by income sources. It argues that authors of a recent article based their conclusions on misinterpreted decomposition results. It also argues that marginal effects, derived as elasticities of inequality with respect to uniform increases in income from each source, are easily interpreted and can be compared across different decomposition rules.

Suggested Citation

  • Kimhi, Ayal, 2011. "Comment: On the Interpretation (and Misinterpretation) of Inequality Decompositions by Income Sources," World Development, Elsevier, vol. 39(10), pages 1888-1890.
  • Handle: RePEc:eee:wdevel:v:39:y:2011:i:10:p:1888-1890 DOI: 10.1016/j.worlddev.2011.08.001
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    References listed on IDEAS

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    1. Paul, Satya, 2004. "Income sources effects on inequality," Journal of Development Economics, Elsevier, vol. 73(1), pages 435-451, February.
    2. Anthony F. Shorrocks, 1983. "The Impact of Income Components on the Distribution of Family Incomes," The Quarterly Journal of Economics, Oxford University Press, vol. 98(2), pages 311-326.
    3. Podder, Nripesh & Chatterjee, Srikanta, 2002. "Sharing the national cake in post reform New Zealand: income inequality trends in terms of income sources," Journal of Public Economics, Elsevier, vol. 86(1), pages 1-27, October.
    4. Jonathan Morduch & Terry Sicular, 2002. "Rethinking Inequality Decomposition, With Evidence from Rural China," Economic Journal, Royal Economic Society, vol. 112(476), pages 93-106, January.
    5. Davis, Benjamin & Winters, Paul & Carletto, Gero & Covarrubias, Katia & QuiƱones, Esteban J. & Zezza, Alberto & Stamoulis, Kostas & Azzarri, Carlo & DiGiuseppe, Stefania, 2010. "A Cross-Country Comparison of Rural Income Generating Activities," World Development, Elsevier, vol. 38(1), pages 48-63, January.
    6. Podder, Nripesh, 1993. "The Disaggregation of the Gini Coefficient by Factor Components and Its Applications to Australia," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 39(1), pages 51-61, March.
    7. Lerman, Robert I & Yitzhaki, Shlomo, 1985. "Income Inequality Effects by Income," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 151-156, February.
    8. Graham Pyatt & Chau-nan Chen & John Fei, 1980. "The Distribution of Income by Factor Components," The Quarterly Journal of Economics, Oxford University Press, vol. 95(3), pages 451-473.
    9. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
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    Cited by:

    1. Philipp Ehrl, 2014. "A breakdown of residual wage inequality in Germany," Working Papers 150, Bavarian Graduate Program in Economics (BGPE).
    2. Simon Jurkatis, 2013. "Dos and Don'ts of Gini Decompositions," Working Papers 2013003, Berlin Doctoral Program in Economics and Management Science (BDPEMS).
    3. Jurkatis, Simon & Strehl, Wolfgang, 2014. "Gini decompositions and Gini elasticities: On measuring the importance of income sources and population subgroups for income inequality," Discussion Papers 2014/22, Free University Berlin, School of Business & Economics.

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