Decomposition of income inequality into multiple characteristics. Formerly project director at unuwider, he has taught and researched in development economics an applied econometrics at a range of universities including the university of new england and the university of sydney and he is an honorary professor at. In particular, it discusses this decomposition in the context of the gini and the theil indexes. Moreover, household level data are used in this chapter, complementing the existing literature, which is mostly based on aggregate data. As a result, the methodology extends qualitatively the results obtained in standard environmental impact regressions as it comprehends further social dimensions of the sustainable development concept, i.
Regressionbased decomposition using household data guanghua wan and zhangyue zhou abstract a considerable literature exists on the measurement of income inequality in china and its increasing trend. Regressionbased decompositions of rankdependent indicators of. Part of the economic studies in inequality, social exclusion and wellbeing book series eiap abstract this study investigates the determinants of income diversification for nonfarm activities using a twopart model and a breakdown of income inequality using gini and regressionbased inequality decompositions using data from the ethiopian rural household survey 2009. I it allows inequality accounting but not a causal analysis. Regression based inequality decomposition statalist. Income distribution is an economic term referring to the distribution of income within a nations population. Fields 2003 stars his methodology by the standard loglinear regression equation.
Pdf regressionbased inequality decomposition researchgate. Generalized linear model and regression based decomposition of income inequality has been used for regression purpose and to see factors contribution to income inequality respectively. Further results on the regressionbased approach to. In recent years several regression based decomposition methods have been developed in order to identify the main determinants of socioeconomic inequality of health. The decomposition of inequality using regression provides a neat solution for this wan 2007. Regression based approaches to inequality decomposition are appealing because they overcome many of the limitations of standard decomposition by groups.
Shorrocks this paper disaggregates the income of individuals or households into different factor components, such as earnings, investment income, and transfer payments, and considers how to assess the contributions of these sources to total income inequality. The regression based decomposition according to the fields method and the shapley approach generally speaking, the regression based inequality decomposition methods allow quantifying the impact of the determinants of inequality. The reason for this is set out in the paper by shorrocks referenced in the help file. Regressionbased inequality decomposition, following. Fiorioy 6th december 2005 decomposition analysis of inequality is important for understanding the main determinants of inequality and for policy analysis. A simple procedure is developed for rectifying these pitfalls.
Indeed, the decomposition of a given inequality measure through a regressionbased method combined with the shapley value approach aims at assessing the contributions of a set of factors the explanatory variables in the income regression model 1 whose sum accounts for the inequality indicator. Section 4 describes the data used and section 5 concludes the paper by. Stata module to calculate regression based inequality decomposition. Regressionbased approaches for the decomposition of. Another book that is considered classic in inequalities is inequalities by g. Source of inequality in consumption expenditure in india.
The building blocks of international ecological footprint. Juhn, murphy and pierce 1993 extended the earlier work to permit decomposition of betweengroup difference in the full distribution rather than in the mean of income only, as. Decompositions at one point in time total inequality i can be decomposed into a component of inequality between the population groups ib and the remaining withingroup inequality iw. The procedure does not impose any restrictions on the underlying regression model and it can be applied to any inequality measures. Regressionbased inequality decomposition, following fields 2003. Decomposing educational inequalities in child mortality. Let us consider the decomposition of a population between rural and urban. Jenkins university college of swansea final version received 11 november 1993. The econometrics of inequality and poverty lecture 10. To date, however, work on regression based methods of inequality has.
It is found that geography has been the dominant factor but is becoming less important in explaining total inequality. This talk discusses ineqrbd, a program for ols regression based decomposition suggested by g. The contribution of each source to measured income inequality is the sum of its weighted marginal contributions in all possible configurations of sources as. In doing so, we identify the underlying blocks of intragenerational inequality in order deal with policy recommendations aimed at both sustainability and equity.
Regression based inequality decomposition science publishing. In recent years, the central government has been laying more emphasis on redistributive policies such as, inclusive growth strategy in addition to keeping high the growth momentum. Policy impacts on inequality decomposition of income inequality by subgroups 1 1. The regressionbased inequality decomposition will be employed in this study. The method is a generalization of the decomposition presented by oaxaca 1973 and blinder 1973, who separate inequality of mean income between groups into di. For academics, regressionbased decompositions hold great potential.
Decomposing the rich dad effect on income inequality using. The technique is based on recentered influence function regression and. Based decomposition fields, 2003 to disentangle the contributions of impact drivers to the asymmetries among countries in natural resource consumption as measured by per capita ef. Much less is known about the driving forces of this trend and their quantitative contributions. Compared with the classical methodologies, the regression based method gives the. The study 30 combine the regression based decomposition technique and the shapley value framework developed 26 in analysing income inequality in rural china between 1996 and 2002.
Some inequality indices do not lead themselves to a simple decomposition depending only on group means, weights and group inequality. The fields approach to rb decomposition of inequality i following fields suggestion, the ols estimate of 3 can be used for inequality decomposition. The decomposition is based on the incomegenerating function. The results show that education, wealth, as well as the employment sector are significant contributors to income inequality in indonesia. Statistical software components s456960, boston college department of economics.
List of books and articles about income inequality online. This paper uses the regression based decomposition method of fields 2003. This paper represents an early attempt to apply the regressionbased. Our sample consists of adult children aged more than 20 years with positive labor earnings. Decomposition of income inequality by income sources 1 1. Eight explanations for uk income inequality trends between 1971 and 1986 are assessed by pooling evidence from inequality index decompositions by population subgroup and by. Hello, i am running the following command for my analysis on inequality decomposition to know the contribution of each independent variables. Previous studies of inequality in health and mortality have largely focused on income based inequality. Literature on inequality decomposition points to a wide regional variation in both the components and effects of income inequality. Economic growth is also closely aligned to factors such as income inequality and income distribution. The study employs an unconditional quantile regression and recently proposed decomposition technique based on recentred influence functions. The contribution of each source to measured income inequality is. And, as the help file, states the decomposition rule did not depend on the choice of measure summarizing inequality in total income. Noting that the approach based on shorrocks and fields is not directly applicable to an important welfarebased inequality index, namely atkinsons inequality index, we generalise it to derive shares for this index.
We also highlight some pitfalls that arise from uncritical use of the regression approach. Regressionbased inequality decomposition following fields. No 101, wider working paper series from world institute for development economic research unuwider keywords. Shapley inequality decomposition, including the nested shapley chantreuil and trannoy 1999 and the owen decomposition shorrocks 1999, based on dening a hierarchical structure of incomes.
This studies focusing on investigating the determinant of inequality in ethiopia by using the raw data collected from central stastical authority based on the regression decomposition of fields methodology. This figure shows kernel density estimates of urban and rural household welfare based on the 1993 and 1998 vlss, respectively. This paper applies the regression based inequality decomposition approach to explore determinants of income inequality in cameroon using the 2007 cameroon household consumption survey. The procedure does not impose any restrictions on the underlying regression model and it can be applied to any inequ. Dear colleagues, this special issue is devoted to the econometric analysis of income inequality and income distributions. Unconditional quantile regression based decomposition method. Pioneers in this area include oaxaca 1973 and blinder 1973. Accounting for income inequality and its change digitalcommons.
The regressionbased decomposition allows for the inclusion of control variables as well as other socioeconomic determinants of inequality rather. Is it possible to use regression based inequality decomposition userwritten command ineqrbd where dependent variable i. The impacts of financial development, urbanization, and. Finally, in this paper we are silent about methodological and ethical questions related to the choice of an index to quantify univariate inequality and inequity. I need to implement heckman model with inequality decomposition. A range of different applications of the regression based income inequality decomposition literature exist yuko et al. In this paper we present a new regression approach that decomposes the correlation between socioeconomic conditions and health outcomes more directly than has been done so far. The purpose of this research is to introduce a new approach to the decomposition of the gini ratio into three components, supporting them with economic and statistical rigorous interpretations. The approach employed in this study is regression based inequality decomposition using the shapley value decomposition framework.
Widening inequality has significant implications for growth and macroeconomic stability. I strongly recommend that you read the background literature before proceeding further. Regressionbased approaches for the decomposition of income. Once combined with conventional decomposition methods or the shapley value approach of shorrocks 1999, what is being. This talk discusses ineqrbd, a program for ols regressionbased decomposition suggested by g. Diversification into nonfarm activities in ethiopia. The first man who, having fenced in a piece of land, said this is mine, and found people naive enough to believe him, that man was the true founder of civil society.
Americas 20 richest people now own more wealth than the bottom half of the rest of the population combined. The regression based decomposition approach is employed to measure the relative contribution of each determinant to. Regression based approaches for the decomposition of income inequality in italy, 19982008 rosalba manna 1, andrea regoli 2 abstract decompositions by population subgroups and by income sources represent the traditional techniques for decomposing income inequality. The regression based decomposition allows for the inclusion of control variables as well as other socioeconomic determinants of inequality rather than the geographical location gunatilaka and chotikapanich 2009. This paper carries out an empirical decomposition of international inequality in the ecological footprint with a view to quantifying the extent of the contribution of explanatory variables such as countries affluence, economic structure, demographic characteristics, climate and technology. These findings suggest that any policy aimed at reducing unequal access to. The approach employed is regression based inequality decomposition using the shapley value decomposition framework. We are living in a time of extreme inequality, and few places are more unequal than the united states. The formulae used are those proposed by fields 2003 which, in turn, are closely related to those proposed by shorrocks 1982 for non regression based decomposition of inequality by income source. For example, continuous variables are permissible, and it is possible to control for endogeneity. We find significant spatial differences in consumption expenditure across selected quantiles, with ruralurban inequalities driven largely by differences in returns to households endowments. In particular, it defines the concepts of within and between inequality and analyses how different inequality indexes perform with respect to this decomposition.
Regressionbased decomposition of inequality in dineq. We use a regression based inequality decomposition approach. Determinants of income inequality in urban ethiopia. Pdf this talk discusses ineqrbd, a program for ols regressionbased decomposition suggested by g. Rethinking inequality decomposition, with evidence from rural china jonathan morduch and terry sicular we examine inequality decompositions by income source and describe a general, regressionbased approach for decomposing inequality. An unconditional quantile regression based decomposition. This function uses a multivariate regression based decomposition method. Summary this tool illustrates how to decompose inequality measures by subgroups of populations. The use of the regression based decomposition method, thus, brings a benefit of going beyond a priori assumptions about attributes with which we should assess health inequity.
Multiple variables can be added to the function in order to calculate the contribution of each individual variable including the residual to the inequality. Below, decompositions are provided for the ge class. This paper investigates the impacts of financial development, urbanization, and globalization on income inequality in china by applying a regression based inequality decomposition approach to panel data on chinese provinces. Kate pickett and richard wilkinsons the spirit level not only changed the way we understand and view inequality, it inspired the creation of the equality trust and our work. A threestage approach to measuring health inequalities. To achieve this goal, the sources of income inequality must be identified appropriately. It provides an exact decomposition of the inequality of total income into inequality contributions. Fields accounting for income inequality and its change.
Statistical software components from boston college department of economics. The regression based inequality decomposition will be employed in this study. Different methods of decomposing changes in poverty into growth. Given the recent surge of inequality research, this special issue seeks to combine both theoretical and applied contributions which advance the econometric analysis of income inequality and income distributions. Unconditional quantile regressionbased decomposition. The paper revisits regressionbased inequality decomposition, derives further theoretical results on the factor shares and applies them in an empirical setting. We develop a general method for decomposing socioeconomic inequality in health. Decomposition analyses for the uk, 197186 by stephen p. Summary this tool illustrates how to decompose inequality measures by income sources. A quantile regression decomposition of urbanrural inequality. The term is synonymous today with income inequality in the current climate.
A stepbystep procedure and numerical examples give operational content to the tool. This approach has been developed following inequality decomposition by factor component method of shorrocks 1982. For notational consistency, we have used the notations of fields 2003. For years, economists have attempted to develop the regressionbased approach to inequality decomposition. This paper aims to focus on trends in oregon counties as part of the common approach to study inequality decomposition on a localized basis. Using data for the period 19932007, the regression based inequality decomposition methodology we use allows us to extend the results obtained in standard environmental impact regressions stirpat models, and to deal with an often neglected aspect of such models, that of equity within generations. Inequality decompositions abstract we show how classic source decomposition and subgroup decomposition meth ods can be reconciled with regression methodology used in the recent liter ature. He is principal economist at the asian development bank. We investigate the sources of income inequality in indonesia using householdlevel data indonesia family life survey. Interpreting inequality decomposition results statalist. Find the top 100 most popular items in amazon books best sellers. A direct regression approach to decomposing socioeconomic. China search for similar items in econpapers pages. University of naples parthenope, department of statistics and mathematics for economic research.
Regression based inequality decomposition 09 sep 2017, 04. Stata module to calculate regressionbased inequality decomposition. This study aims to investigate the sources of income inequality in rural china. This paper represents an early attempt to apply the regression. Mar 10, 2015 cauchy schwarz master class is already pretty good. In order to decompose the source of income inequality, the shapley value decomposition framework proposed by shorrocks 1999 and the method employed by.
A new method, with application to the distribution of earnings in the united states, research in labor economics, 2003. Empirical examples are provided to demonstrate the use of the procedure, and to contrast our results with those based on recent developments of fields and yoo 2000 and morduch and sicular 2002. A general method for decomposing the causes of socioeconomic. Maternal education plays an important role in determining access to water and sanitation, and inequalities in child mortality arising due to differential access, especially in low and middleincome countries such as peru. The most influential and talkedabout book on society in the last decade. Inequality decomposition by factor components authors. We trace their fathers income status 8 when the children were in the age between 15 and 18. Goldberger brought to my attention a passage in his 1964 book pp. Section 3 describes the methodology applied to decompose the observed inequality into the explanatory variables of the regression model used. Higher economic growth in india has bypassed a major percentage of population, whose share in income and benefits has been low. Carlo fiorio and stephen jenkins statistical software components from boston college department of economics. Dynamic changes in determinants of inequalities in health in. The use of regression based decomposition is novel in that it allows ranking of these determinants according to any inequality measure. Discover the best income inequality in best sellers.
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