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A Review of Decomposition of Income Inequality

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  • Heshmati, Almas

    (Jönköping University)

Abstract

This paper is a review of recent developments of parametric and non-parametric approaches to decompose inequality by subgroups, income sources, causal factors and other unit characteristics. Different methods of decomposing changes in poverty into growth, redistribution, poverty standard and residual components are described. In parametric approaches the dynamics of income accounting for transitory and permanent changes in individual and household earnings conditional of various covariates are also reviewed. Statistical inferences for inequality measurement including delta and bootstrapping and other methods to provide estimates of the sampling distribution are presented. These issues are important in the design of policy measures and expectations about their impacts on earnings inequality and poverty reductions.

Suggested Citation

  • Heshmati, Almas, 2004. "A Review of Decomposition of Income Inequality," IZA Discussion Papers 1221, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp1221
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    More about this item

    Keywords

    income inequality; poverty; decomposition; parametric; non-parametric; Gini index;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • N30 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - General, International, or Comparative

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