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Shapley inequality decomposition by factor components: Some methodological issues

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  • Mercedes Sastre
  • Alain Trannoy

Abstract

Decomposition analysis provides help in the difficult task of explaining how economies trends and government policies affect the distribution of income. In this context, recent studies have proposed the application of the “Shapley Value” allocation method, a concept from cooperative game theory, to the decomposition of inequality. This paper examines the “Shapley inequality decomposition” by factor components focussing in particular on some methodological issues that cannot be solved from a theoretical point of view. Following an inductive approach, the empirical evidence obtained by applying several variants of the Shapley decomposition to the UK and US income distributions suggests an answer to some of the dilemmas faced by applied economists when implementing the Shapley decomposition technique. Copyright Springer-Verlag 2002

Suggested Citation

  • Mercedes Sastre & Alain Trannoy, 2002. "Shapley inequality decomposition by factor components: Some methodological issues," Journal of Economics, Springer, vol. 77(1), pages 51-89, December.
    • Handle: RePEc:kap:jeczfn:v:77:y:2002:i:1:p:51-89
    DOI: 10.1007/BF03052500
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    References listed on IDEAS

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    4. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
    5. François Bourguignon & Pierre-André Chiappori, 1998. "Fiscalité et redistribution," Revue Française d'Économie, Programme National Persée, vol. 13(1), pages 3-64.
    6. Maria Cancian & Deborah Reed, 1998. "Assessing The Effects Of Wives' Earnings On Family Income Inequality," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 73-79, February.
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    More about this item

    Keywords

    Shapley Value; Inequality; Decomposition; D31;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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