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Further results on the regression-based approach to inequality decomposition with evidence from India

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  • Maurizio Bigotta
  • Jaya Krishnakumar
  • Uma Rani

Abstract

The paper revisits regression-based inequality decomposition, derives further theoretical results on the factor shares and applies them in an empirical setting. Noting that the approach based on Shorrocks and Fields is not directly applicable to an important welfare-based inequality index, namely Atkinson’s inequality index, we generalise it to derive shares for this index. We also derive the asymptotic distribution of all share estimators for obtaining their standard errors necessary for drawing inference. Finally, we use our theoretical results to examine the major factors that contribute to income inequality in India. Our results show that education and household size are the two most dominant factors contributing to income inequality in both rural and urban areas, followed by employment status and regional differences. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Maurizio Bigotta & Jaya Krishnakumar & Uma Rani, 2015. "Further results on the regression-based approach to inequality decomposition with evidence from India," Empirical Economics, Springer, vol. 48(3), pages 1233-1266, May.
    • Handle: RePEc:spr:empeco:v:48:y:2015:i:3:p:1233-1266
    DOI: 10.1007/s00181-014-0819-5
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    Cited by:

    1. Uma Rani & Jaya Krishnakumar & Maurizio Bigotta, 2017. "Accounting for income inequality: empirical evidence from India," Indian Economic Review, Springer, vol. 52(1), pages 193-229, December.
    2. Halvarsson, Daniel & Korpi, Martin & Wennberg, Karl, 2016. "Entrepreneurship and Income Inequality," Ratio Working Papers 281, The Ratio Institute.
    3. Halvarsson, Daniel & Korpi, Martin & Wennberg, Karl, 2018. "Entrepreneurship and income inequality," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 275-293.
    4. Sabyasachi Tripathi, 2017. "Source of Inequality in Consumption Expenditure in India: A Regression Based Inequality Decomposition Analysis," Journal of Income Distribution, Ad libros publications inc., vol. 25(1), pages 1-34, March.
    5. Mohsen Ayyash & Siok Kun Sek, 2020. "Decomposing Inequality in Household Consumption Expenditure in Malaysia," Economies, MDPI, vol. 8(4), pages 1-15, October.
    6. Jiang, Yixiao, 2022. "Credit ratings, financial ratios, and equity risk: A decomposition analysis based on Moody’s, Standard & Poor’s and Fitch’s ratings," Finance Research Letters, Elsevier, vol. 46(PB).
    7. Cathal O’Donoghue & Jason Loughrey & Denisa M. Sologon, 2018. "Decomposing the Drivers of Changes in Inequality During the Great Recession in Ireland using the Fields Approach," The Economic and Social Review, Economic and Social Studies, vol. 49(2), pages 173-200.
    8. Sabyasachi Tripathi & Komali Yenneti, 2024. "Does inequality in urban population distribution lead to income inequality? Evidence from India," Asia-Pacific Journal of Regional Science, Springer, vol. 8(3), pages 787-818, September.
    9. Lwin Lwin Aung & Peter Warr, 2021. "Decomposing changes in inequality: Evidence from Myanmar," Review of Development Economics, Wiley Blackwell, vol. 25(3), pages 1172-1196, August.

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    More about this item

    Keywords

    Income inequality; Regression-based decompositions ; Education; Labour status; India; D63; C21; J24;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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