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Understanding inequality trends: microsimulation decomposition for Italy

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  • Fiorio, Carlo V.

Abstract

This paper suggests overcoming some limitations of traditional inequality decomposition methods by developing a combination of Burtless (1999) and DiNardo et al. (1996), two different microsimulation methods for decomposing inequality. By using this combination it is possible to take into consideration the dispersion of income sources as well as the socio-demographic evolution of the population under study, in a single framework and across many years. This methodology maximizes clarity of results and allows one to easily perform tests on results. An application to Italian household inequality is provided to analyze marginal and joint effects of demographic trends and changed dispersion of different income factors between 1977 and 2002.

Suggested Citation

  • Fiorio, Carlo V., 2006. "Understanding inequality trends: microsimulation decomposition for Italy," LSE Research Online Documents on Economics 6544, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:6544
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    File URL: http://eprints.lse.ac.uk/6544/
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    Cited by:

    1. Muller, Adrian, 2006. "Clarifying Poverty Decomposition," Working Papers in Economics 217, University of Gothenburg, Department of Economics, revised 17 Nov 2008.
    2. Peter Lindner, 2015. "Factor decomposition of the wealth distribution in the euro area," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(2), pages 291-322, May.

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    More about this item

    Keywords

    Microsimulation; counterfactual analysis; household inequality trend; inequality decomposition.;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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