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Re-interpreting sub-group inequality decompositions
 
Author:Elbers, Chris; Lanjouw, Peter; Mistiaen, Johan A.; Ozler, Berk; Collection Title:Policy, Research working paper ; no. WPS 3687
Country:World; Date Stored:2005/08/19
Document Date:2005/08/01Document Type:Policy Research Working Paper
SubTopics:Governance Indicators; Rural Poverty Reduction; Inequality; Services & Transfers to Poor; Poverty Impact EvaluationLanguage:English
Region:The World RegionReport Number:WPS3687
Volume No:1 of 1  

Summary: The authors propose a modification to the conventional approach of decomposing income inequality by population sub-groups. Specifically, they propose a measure that evaluates observed between-group inequality against a benchmark of maximum between-group inequality that can be attained when the number and relative sizes of groups under examination are fixed. The authors argue that such a modification can provide a complementary perspective on the question of whether a particular population breakdown is salient to an assessment of inequality in a country. As their measure normalizes between-group inequality by the number and relative sizes of groups, it is also less subject to problems of comparability across different settings. The authors show that for a large set of countries their assessment of the importance of group differences typically increases substantially on the basis of this approach. The ranking of countries (or different population groups) can also differ from that obtained using traditional decomposition methods. Finally, they observe an interesting pattern of higher levels of overall inequality in countries where their measure finds higher between-group contributions.

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