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Beyond Oaxaca-Blinder: Accounting for differences in household income distributions

Author

Listed:
  • François Bourguignon

    (BM = WB - La Banque Mondiale = The World Bank - WBG = GBM - World Bank Group = Groupe Banque Mondiale)

  • Ferreira Francisco H. G.

    (BM = WB - La Banque Mondiale = The World Bank - WBG = GBM - World Bank Group = Groupe Banque Mondiale)

  • Philippe G. Leite

    (BM = WB - La Banque Mondiale = The World Bank - WBG = GBM - World Bank Group = Groupe Banque Mondiale)

Abstract

This paper develops a method to decompose differences across distributions of household income, based on counterfactual distributions that 'lie between' the actually observed distributions. Our approach decomposes differences between any two income distributions (or functionals such as inequality or poverty measures) into shares due to price effects; occupational structure effects; and endowment effects. Comparing the household income distributions of the USA and Brazil in 1999, we find that most of Brazil's excess inequality (of 13 Gini points) is accounted for by underlying inequalities in the distributions of education and of non-labor income, notably pensions (between four and six Gini points each). Steeper returns to education in Brazil also make an important contribution (of two to five points). Differences in occupational structure and in racial and demographic composition are much less important.

Suggested Citation

  • François Bourguignon & Ferreira Francisco H. G. & Philippe G. Leite, 2008. "Beyond Oaxaca-Blinder: Accounting for differences in household income distributions," Post-Print halshs-00754283, HAL.
    • Handle: RePEc:hal:journl:halshs-00754283
    DOI: 10.1007/s10888-007-9063-y
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    Keywords

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    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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