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Factor decomposition of cross-country income inequality with interaction effects

Author

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  • Bruno Bracalente
  • Cristiano Perugini

Abstract

In this paper we propose a decomposition of the Theil measures of per capita income inequality which accounts for interaction effects between its multiplicative factors. Our theoretical findings, supported by an empirical application referring to EU-25 countries, suggest that neglecting these effects may strongly bias the relative importance of some factors, with consequent misleading policy implications.

Suggested Citation

  • Bruno Bracalente & Cristiano Perugini, 2008. "Factor decomposition of cross-country income inequality with interaction effects," Quaderni del Dipartimento di Economia, Finanza e Statistica 54/2008, Università di Perugia, Dipartimento Economia.
    • Handle: RePEc:pia:wpaper:54/2008
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    File URL: http://www2.ec.unipg.it/quaderni/qd54web.pdf
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    Citations

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    Cited by:

    1. Mirella Damiani, 2010. "Labour regulation, corporate governance and varieties of capitalism," Quaderni del Dipartimento di Economia, Finanza e Statistica 76/2010, Università di Perugia, Dipartimento Economia.
    2. Stefano Herzel & Marco Nicolosi & Cătălin Stărică, 2012. "The cost of sustainability in optimal portfolio decisions," The European Journal of Finance, Taylor & Francis Journals, vol. 18(3-4), pages 333-349, May.
    3. Damiani, Mirella & Pompei, Fabrizio & Ricci, Andrea, 2011. "Temporary job protection and productivity growth in EU economies," MPRA Paper 29698, University Library of Munich, Germany.
    4. Davide Castellani & Fabio Pieri, 2011. "Foreign Investments and Productivity Evidence from European Regions," Quaderni del Dipartimento di Economia, Finanza e Statistica 83/2011, Università di Perugia, Dipartimento Economia.
    5. Silvia Micheli, 2010. "Learning Curve and Wind Power," Quaderni del Dipartimento di Economia, Finanza e Statistica 81/2010, Università di Perugia, Dipartimento Economia.
    6. Bruno Bracalente & Cristiano Perugini, 2010. "The components of regional disparities in Europe," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 44(3), pages 621-645, June.
    7. Francesco Venturini, 2011. "Product variety, product quality, and evidence of Schumpeterian endogenous growth: a note," Quaderni del Dipartimento di Economia, Finanza e Statistica 93/2011, Università di Perugia, Dipartimento Economia.

    More about this item

    Keywords

    Inequality; Decomposition; Interaction Effects;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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