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Accounting for income distribution trends: A density function decomposition approach

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  • JENKINS Stephen P.
  • VAN KERM Philippe

Abstract

This paper develops methods for decomposing changes in the income distribution using subgroup decompositions of the income density function. Overall changes are related to changes in subgroup shares and changes in subgroup densities, where the latter are broken down further using elementary transformations of individual incomes. These density decompositions are analogous to the widely-used decompositions of inequality indices by population subgroup, except that they summarize multiple features of the income distribution (using graphs), rather than focusing on a speci¯c feature such as dispersion, and are not dependent on the choice of a speci¯c summary index. Nonethe- less, since inequality and poverty indices can be expressed as PDF functionals, our density-based methods can also be used to provide numerical decompositions of these. An application of the methods reveals the multi-faceted nature of UK income distri- bution trends during the 1980s.

Suggested Citation

  • JENKINS Stephen P. & VAN KERM Philippe, 2004. "Accounting for income distribution trends: A density function decomposition approach," IRISS Working Paper Series 2004-07, IRISS at CEPS/INSTEAD.
    • Handle: RePEc:irs:iriswp:2004-07
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    References listed on IDEAS

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    1. Philippe Van Kerm, 2003. "Adaptive kernel density estimation," Stata Journal, StataCorp LP, vol. 3(2), pages 148-156, June.
    2. Cowell, F.A., 2000. "Measurement of inequality," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 2, pages 87-166, Elsevier.
    3. Shorrocks, Anthony F, 1984. "Inequality Decomposition by Population Subgroups," Econometrica, Econometric Society, vol. 52(6), pages 1369-1385, November.
    4. Mookherjee, Dilip & Shorrocks, Anthony F, 1982. "A Decomposition Analysis of the Trend in UK Income Inequality," Economic Journal, Royal Economic Society, vol. 92(368), pages 886-902, December.
    5. Dasgupta, Partha & Sen, Amartya & Starrett, David, 1973. "Notes on the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 6(2), pages 180-187, April.
    6. A.B. Atkinson & F. Bourguignon (ed.), 2000. "Handbook of Income Distribution," Handbook of Income Distribution, Elsevier, edition 1, volume 1, number 1.
    7. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198281931.
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    More about this item

    Keywords

    accounting; trends ; decomposition;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution

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