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Inequality decomposition values: the trade-off between marginality and efficiency

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  • Frédéric Chantreuil

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

  • Alain Trannoy

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper presents a general procedure for decomposing income inequality measures by income sources. The methods of decomposition proposed are based on the Shapley value and extensions of the Shapley value of transferable utility cooperative games. In particular, we find that Owen's value can find an interesting application in this context.We show that the axiomatization by the potential of Hart and Mas-Colell remains valid in the presence of the domain restriction of inequality indices. We also examine the properties of these decomposition rules and perform a comparison with Shorrocks' decomposition rule properties.

Suggested Citation

  • Frédéric Chantreuil & Alain Trannoy, 2013. "Inequality decomposition values: the trade-off between marginality and efficiency," Post-Print halshs-00733401, HAL.
    • Handle: RePEc:hal:journl:halshs-00733401
    DOI: 10.1007/s10888-011-9207-y
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    References listed on IDEAS

    as
    1. Kolm, Serge-Christophe, 1976. "Unequal inequalities. II," Journal of Economic Theory, Elsevier, vol. 13(1), pages 82-111, August.
    2. Kolm, Serge-Christophe, 1976. "Unequal inequalities. I," Journal of Economic Theory, Elsevier, vol. 12(3), pages 416-442, June.
    3. Shorrocks, Anthony F, 1984. "Inequality Decomposition by Population Subgroups," Econometrica, Econometric Society, vol. 52(6), pages 1369-1385, November.
    4. AUMANN, Robert J. & DREZE, Jacques H., 1974. "Cooperative games with coalition structures," LIDAM Reprints CORE 217, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
    6. John C. H. Fei & Gustav Ranis & Shirley W. Y. Kuo, 1978. "Growth and the Family Distribution of Income by Factor Components," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 92(1), pages 17-53.
    7. Shorrocks, A F, 1980. "The Class of Additively Decomposable Inequality Measures," Econometrica, Econometric Society, vol. 48(3), pages 613-625, April.
    8. Winter, Eyal, 1992. "The consistency and potential for values of games with coalition structure," Games and Economic Behavior, Elsevier, vol. 4(1), pages 132-144, January.
    9. Hart, Sergiu & Mas-Colell, Andreu, 1989. "Potential, Value, and Consistency," Econometrica, Econometric Society, vol. 57(3), pages 589-614, May.
    10. Theil, Henri, 1979. "The measurement of inequality by components of income," Economics Letters, Elsevier, vol. 2(2), pages 197-199.
    11. Calvo, Emilio & Javier Lasaga, J. & Winter, Eyal, 1996. "The principle of balanced contributions and hierarchies of cooperation," Mathematical Social Sciences, Elsevier, vol. 31(3), pages 171-182, June.
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