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Inequality decomposition: a reconciliation

Listed author(s):
  • Frank Cowell
  • Carlo V. Fiorio

We show how classic source-decomposition and subgroup-decomposition methods can be reconciled with regression methodology used in the recent literature. We also highlight some pitfalls that arise from uncritical use of the regression approach. The LIS database is used to compare the approaches using an analysis of the changing contributions to inequality in the United States and Finland.

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File URL: http://eprints.lse.ac.uk/25431/
File Function: Open access version.
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 25431.

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Length: 35 pages
Date of creation: Apr 2009
Handle: RePEc:ehl:lserod:25431
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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. Carlo Fiorio & Stephen Jenkins, 2007. "Regression-based inequality decomposition," United Kingdom Stata Users' Group Meetings 2007 03, Stata Users Group.
  3. Shorrocks, A F, 1980. "The Class of Additively Decomposable Inequality Measures," Econometrica, Econometric Society, vol. 48(3), pages 613-625, April.
  4. Theil, Henri, 1979. "The measurement of inequality by components of income," Economics Letters, Elsevier, vol. 2(2), pages 197-199.
  5. Andrea Brandolini & Timothy M. Smeeding, 2007. "Inequality Patterns in Western-Type Democracies: Cross-Country Differences and Time Changes," CHILD Working Papers wp08_07, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
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  9. François Bourguignon & Francisco Ferreira & Phillippe Leite, 2008. "Beyond Oaxaca–Blinder: Accounting for differences in household income distributions," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 6(2), pages 117-148, June.
  10. Jenkins, Stephen P, 1995. "Accounting for Inequality Trends: Decomposition Analyses for the UK, 1971-86," Economica, London School of Economics and Political Science, vol. 62(245), pages 29-63, February.
  11. Xavier Sala-i-Martin, 2006. "The World Distribution of Income: Falling Poverty and … Convergence, Period," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 351-397.
  12. Charles Blackorby & David Donaldson & Maria Auersperg, 1981. "A New Procedure for the Measurement of Inequality within and among Population Subgroups," Canadian Journal of Economics, Canadian Economics Association, vol. 14(4), pages 665-685, November.
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  14. 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.
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  16. Cowell, Frank A & Jenkins, Stephen P, 1995. "How Much Inequality Can We Explain? A Methodology and an Application to the United States," Economic Journal, Royal Economic Society, vol. 105(429), pages 421-430, March.
  17. Chris Elbers & Peter Lanjouw & Johan Mistiaen & Berk Özler, 2008. "Reinterpreting between-group inequality," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 6(3), pages 231-245, September.
  18. Cowell, Frank A, 1988. "Inequality Decomposition: Three Bad Measures," Bulletin of Economic Research, Wiley Blackwell, vol. 40(4), pages 309-312, October.
  19. Chantreuil, F. & Trannoy, A., 1999. "Inequality Decomposition Values: the Trade-Off Between Marginality and Consistency," Papers 99-24, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
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  25. François Bourguignon & Martin Fournier & Marc Gurgand, 1999. "Fast Development with a Stable Income Distribution : Taiwan, 1979-1994," Working Papers 99-21, Centre de Recherche en Economie et Statistique.
  26. Fields, Gary S & Yoo, Gyeongjoon, 2000. "Falling Labor Income Inequality in Korea's Economic Growth: Patterns and Underlying Causes," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(2), pages 139-159, June.
  27. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
  28. Mª Casilda Lasso de la Vega & Ana Marta Urrutia, 2005. "Path independent multiplicatively decomposable inequality measures," Investigaciones Economicas, Fundación SEPI, vol. 29(2), pages 379-387, May.
  29. James E. Foster & Artyom A. Shneyerov, 1999. "A general class of additively decomposable inequality measures," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 14(1), pages 89-111.
  30. Foster, James E. & Shneyerov, Artyom A., 2000. "Path Independent Inequality Measures," Journal of Economic Theory, Elsevier, vol. 91(2), pages 199-222, April.
  31. Casilda Lasso de la Vega & Ana Urrutia, 2008. "The ‘Extended’ Atkinson family: The class of multiplicatively decomposable inequality measures, and some new graphical procedures for analysts," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 6(2), pages 211-225, June.
  32. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
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