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Decomposing the Gini and the Variation Coefficients by Income Sources and Income Recipients

Author

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  • Ilpo Suoniemi

Abstract

The Gini coefficient is not in general decomposable by population groups in terms of subgroup Ginis. On the other hand, there is an extensively used and well founded decomposition of the Gini by income sources. In this paper a decomposition of the Gini by population groups is proposed which is simple and intuitively appealing. Here the decomposition by sources is utilized by defining a set of indicator functions for a partition of the population, and representing income as the sum of synthetic income sources. The approach is extended by treating each income source separately to give a general decomposition table. The table for the Gini is compared with a similar table obtained for the (square of) variation coefficient. The table elements give first order approximations to the change in the value of the inequality measure which is due to a proportional change in the income source affecting all individuals in the relevant group. Empirical applications of the method are illustrated by examples using Finnish household data.

Suggested Citation

  • Ilpo Suoniemi, 2000. "Decomposing the Gini and the Variation Coefficients by Income Sources and Income Recipients," Working Papers 169, Työn ja talouden tutkimus LABORE, Labour Institute for Economic Research LABORE.
    • Handle: RePEc:pst:wpaper:169
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