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Dos and Don'ts of Gini Decompositions

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  • Simon Jurkatis

    (Humboldt-Universitaet zu Berlin)

Abstract

This paper critically assesses widely applied methods of Gini decomposition by income sources and population subgroups. We point to common pitfalls in the interpretation of decomposition results and show that marginal efects provide the only meaningful way to examine the relevance of income sources or population subgroups for total income inequality. Moreover, we show that existing methods are unsuitable to decompose the trend in the Gini coeficient, i.e. to examine the role of income sources or population subgroups for the change in the Gini over time. We provide a coherent method to decompose the Gini trend by income sources. Creation Date: 2013-11-01

Suggested Citation

  • Simon Jurkatis, "undated". "Dos and Don'ts of Gini Decompositions," BDPEMS Working Papers 2013003, Berlin School of Economics.
    • Handle: RePEc:bdp:wpaper:2013003
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    References listed on IDEAS

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    2. Nolan, Matt, 2018. "Did tax-transfer policy change New Zealand disposable income inequality between 1988 and 2013?," Working Paper Series 7661, Victoria University of Wellington, Chair in Public Finance.
    3. Neves Costa, Rita & Pérez-Duarte, Sébastien, 2019. "Not all inequality measures were created equal - The measurement of wealth inequality, its decompositions, and an application to European household wealth," Statistics Paper Series 31, European Central Bank.

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    More about this item

    Keywords

    Income inequality; Gini decomposition; Income sources; Population subgroups; Inequality trend;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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