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Regression-Based Inequality Decomposition: A Critical Review and Application to Farm-Household Income Data

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  • Kimhi, Ayal

Abstract

The purpose of this paper is to critically review and discuss several interpretations of inequality decomposition methods offered in the literature. In particular, I claim that the “property of uniform additions” is not necessarily a desired property of inequality decomposition methods. This applies to decomposition of inequality by income sources as well as to regression-based decomposition by determinants of income. Thus, relying on this property (or lack thereof) to judge against decompositions based on the Gini index of inequality may be misleading. The Gini decomposition rule is more intuitively interpretable than alternative rules, and allows the derivation of the marginal effect on inequality of a uniform increase in an income source or a determinant of income. The results of several competing decomposition rules are compared using simulations and a case study of farm household income in Georgia.

Suggested Citation

  • Kimhi, Ayal, 2007. "Regression-Based Inequality Decomposition: A Critical Review and Application to Farm-Household Income Data," Discussion Papers 290001, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
    • Handle: RePEc:ags:huaedp:290001
    DOI: 10.22004/ag.econ.290001
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    File URL: https://ageconsearch.umn.edu/record/290001/files/kimhi-regression.pdf
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    Cited by:

    1. Kimhi, Ayal, 2011. "Can Female Non-Farm Labor Income Reduce Income Inequality? Evidence from Rural Southern Ethiopia," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114756, European Association of Agricultural Economists.
    2. Ayal Kimhi, 2010. "Entrepreneurship and income inequality in southern Ethiopia," Small Business Economics, Springer, vol. 34(1), pages 81-91, January.
    3. Kimhi, Ayal, 2011. "Comment: On the Interpretation (and Misinterpretation) of Inequality Decompositions by Income Sources," World Development, Elsevier, vol. 39(10), pages 1888-1890.
    4. Ayal Kimhi & Nitzan Tzur-Ilan, 2021. "Structural Changes in Israeli Family Farms: Long-Run Trends in the Farm Size Distribution and the Role of Part-Time Farming," Agriculture, MDPI, vol. 11(6), pages 1-15, June.
    5. Kimhi, Ayal, 2009. "Land Reform and Farm-Household Income Inequality: The Case of Georgia," Discussion Papers 54159, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
    6. Paolo Verme & Branko Milanovic & Sherine Al-Shawarby & Sahar El Tawila & May Gadallah & Enas Ali A. El-Majeed, 2014. "Inside Inequality in the Arab Republic of Egypt : Facts and Perceptions across People, Time, and Space," World Bank Publications - Books, The World Bank Group, number 17583.
    7. Boniface Ngah Epo & Francis Menjo Baye & Nadine Teme Angele Manga, 2011. "Spatial and Inter-temporal Sources of Poverty, Inequality and Gender Disparities in Cameroon: a Regression-Based Decomposition Analysis," Working Papers PMMA 2011-15, PEP-PMMA.
    8. Kimhi, Ayal, 2010. "International Remittances, Domestic Remittances, and Income Inequality in the Dominican Republic," Discussion Papers 93130, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.

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