IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/6544.html
   My bibliography  Save this paper

Understanding inequality trends: microsimulation decomposition for Italy

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/6544/
    File Function: Open access version.
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Andrea Brandolini, 1999. "The Distribution of Personal Income in Post-War Italy: Source Description, Data Quality, and the Time Pattern of Income Inequality," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 58(2), pages 183-239, September.
    2. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
    3. Frank A. Cowell, 1980. "On the Structure of Additive Inequality Measures," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(3), pages 521-531.
    4. F. Chantreuil & A. Trannoy, 1999. "Inequality decomposition values : the trade-off between marginality and consistency," THEMA Working Papers 99-24, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    5. Giovanni D'Alessio & Andrea Brandolini, 2001. "Household Structure and Income Inequality," LIS Working papers 254, LIS Cross-National Data Center in Luxembourg.
    6. P. Jenkins, Stephen & A. Cowell, Frank, 2000. "Estimating welfare indices: household weights and sample design," ISER Working Paper Series 2000-23, Institute for Social and Economic Research.
    7. Andrzej Grodner & Timothy Smeeding, 2000. "Changing Income Inequality in OECD Countries: Updated Results from the Luxembourg Income Study (LIS)," LIS Working papers 252, LIS Cross-National Data Center in Luxembourg.
    8. repec:bla:revinw:v:47:y:2001:i:2:p:139-63 is not listed on IDEAS
    9. Shorrocks, Anthony F, 1984. "Inequality Decomposition by Population Subgroups," Econometrica, Econometric Society, vol. 52(6), pages 1369-1385, November.
    10. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
    11. Martin Biewen & Stephen P. Jenkins, 2003. "Estimation of Generalized Entropy and Atkinson Inequality Indices from Complex Survey Data," Discussion Papers of DIW Berlin 345, DIW Berlin, German Institute for Economic Research.
    12. Bourguignon, Francois, 1979. "Decomposable Income Inequality Measures," Econometrica, Econometric Society, vol. 47(4), pages 901-920, July.
    13. repec:bla:econom:v:62:y:1995:i:245:p:29-63 is not listed on IDEAS
    14. Christopher Erickson & Andrea Ichino, 1995. "Wage Differentials in Italy: Market Forces, Institutions, and Inflation," NBER Chapters, in: Differences and Changes in Wage Structures, pages 265-306, National Bureau of Economic Research, Inc.
    15. John C. H. Fei & Gustav Ranis & Shirley W. Y. Kuo, 1978. "Growth and the Family Distribution of Income by Factor Components," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 92(1), pages 17-53.
    16. Mary C. Daly & Robert G. Valletta, 2006. "Inequality and Poverty in United States: The Effects of Rising Dispersion of Men's Earnings and Changing Family Behaviour," Economica, London School of Economics and Political Science, vol. 73(289), pages 75-98, February.
    17. Cowell, Frank A., 1989. "Sampling variance and decomposable inequality measures," Journal of Econometrics, Elsevier, vol. 42(1), pages 27-41, September.
    18. Freeman, Richard B. & Katz, Lawrence F. (ed.), 1995. "Differences and Changes in Wage Structures," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226261607.
    19. Shorrocks, A F, 1980. "The Class of Additively Decomposable Inequality Measures," Econometrica, Econometric Society, vol. 48(3), pages 613-625, April.
    20. Jonathan Morduch & Terry Sicular, 2002. "Rethinking Inequality Decomposition, With Evidence from Rural China," Economic Journal, Royal Economic Society, vol. 112(476), pages 93-106, January.
    21. Graham Pyatt & Chau-nan Chen & John Fei, 1980. "The Distribution of Income by Factor Components," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 95(3), pages 451-473.
    22. P. Jenkins, Stephen & Biewen, Martin, 2003. "Estimation of Generalized Entropy and Atkinson inequality indices from survey data," ISER Working Paper Series 2003-11, Institute for Social and Economic Research.
    23. Burtless, Gary, 1999. "Effects of growing wage disparities and changing family composition on the U.S. income distribution," European Economic Review, Elsevier, vol. 43(4-6), pages 853-865, April.
    24. Marco Manacorda, 2004. "Can the Scala Mobile Explain the Fall and Rise of Earnings Inequality in Italy? A Semiparametric Analysis, 19771993," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 585-614, July.
    25. Giovanni D'Alessio & Luigi Federico Signorini, 2000. "Disuguaglianza dei redditi individuali e ruolo della famiglia in Italia," Temi di discussione (Economic working papers) 390, Bank of Italy, Economic Research and International Relations Area.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Carlo Vittorio FIORIO, 2008. "Understanding Italian inequality trends: a simulation-based decomposition," Departmental Working Papers 2008-26, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    2. Frank Cowell & Carlo Fiorio, 2011. "Inequality decompositions—a reconciliation," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 9(4), pages 509-528, December.
    3. Frank Cowell & Carlo V. Fiorio, 2010. "GINI DP 4: Inequality Decompositions," GINI Discussion Papers 4, AIAS, Amsterdam Institute for Advanced Labour Studies.
    4. Michele Giammatteo, 2007. "The bidimensional decomposition of inequality: A nested Theil approach," LIS Working papers 466, LIS Cross-National Data Center in Luxembourg.
    5. Stéphane Mussard & Michel Terraza, 2009. "Décompositions des mesures d'inégalité : le cas des coefficients de Gini et d'entropie," Recherches économiques de Louvain, De Boeck Université, vol. 75(2), pages 151-181.
    6. Teixidó Figueras, Jordi & Duro Moreno, Juan Antonio, 2012. "Ecological Footprint Inequality: A methodological review and some results," Working Papers 2072/203168, Universitat Rovira i Virgili, Department of Economics.
    7. Arthur Charpentier & Stéphane Mussard, 2011. "Income inequality games," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 9(4), pages 529-554, December.
    8. 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.
    9. C. Chameni Nembua, 2008. "The 'natural' bidimensional decomposition of inequality indices: evaluating factor contributions to households welfare inequality in Cameroon, 1996-2001," Applied Economics Letters, Taylor & Francis Journals, vol. 15(12), pages 963-970.
    10. Anton I. Votinov & Samvel S. Lazaryan & Vyacheslav N. Ovchinnikov, 2019. "Regression-Based Decomposition of Income Inequality Factors in Russia," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 5, pages 74-89, October.
    11. Stephen P. Jenkins & John Micklewright, 2007. "New Directions in the Analysis of Inequality and Poverty," Discussion Papers of DIW Berlin 700, DIW Berlin, German Institute for Economic Research.
    12. Martin FOURNIER, 2001. "Inequality decomposition by factor component : a “rank-correlation” approach illustrated on the Taiwanese case," Discussion Papers (REL - Recherches Economiques de Louvain) 2001042, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    13. Nerijus Černiauskas & Denisa M. Sologon & Cathal O’Donoghue & Linas Tarasonis, 2022. "Income Inequality and Redistribution in Lithuania: The Role of Policy, Labor Market, Income, and Demographics," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 68(S1), pages 131-166, April.
    14. Chantreuil, Frédéric & Fourrey, Kévin & Lebon, Isabelle & Rebière, Thérèse, 2021. "Magnitude and evolution of gender and race contributions to earnings inequality across US regions," Research in Economics, Elsevier, vol. 75(1), pages 45-59.
    15. Martin Fournier, 2001. "Inequality decomposition by factor component : a “rank-correlation” approach illustrated on the Taiwanese case," Recherches économiques de Louvain, De Boeck Université, vol. 67(4), pages 381-403.
    16. Heshmati, Almas, 2004. "A Review of Decomposition of Income Inequality," IZA Discussion Papers 1221, Institute of Labor Economics (IZA).
    17. Chantreuil, Frédéric & Fourrey, Kévin & Lebon, Isabelle & Rebiere, Therese, 2020. "Decomposing US Income Inequality à La Shapley: Race Matters, but Gender Too," IZA Discussion Papers 12950, Institute of Labor Economics (IZA).
    18. Makarski, Krzysztof & Tyrowicz, Joanna, 2023. "Preference for redistribution during structural change with labor mobility frictions," European Journal of Political Economy, Elsevier, vol. 77(C).
    19. Osnat Israeli, 2007. "A Shapley-based decomposition of the R-Square of a linear regression," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 5(2), pages 199-212, August.
    20. Frank A Cowell & Carlo V. Fiorio, 2006. "Rethinking Inequality Decomposition:Comment," STICERD - Distributional Analysis Research Programme Papers 82, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:6544. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LSERO Manager (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.