The paper proposes a multi-dimensional approach for decomposing changes in the Gini inequality index and the Sen-Shorrocks-Thon poverty index over time. The link among inequality trend, re-ranking of individuals and individuals’ income growth is explained by isolating source and subgroup contributions to the determinants of inequality change over time. We show that the poverty change over time depends on re-ranking of individuals and change in relative disparities between individuals’ poverty gaps. The determinants of change in poverty inequality are then decomposed by source and subgroup, yielding a three-way decomposition which merges time, source and subgroup dimensions of decomposition.
On decomposing inequality and poverty changes over time: A multi-dimensional decomposition
MUSSINI, Mauro
2013-01-01
Abstract
The paper proposes a multi-dimensional approach for decomposing changes in the Gini inequality index and the Sen-Shorrocks-Thon poverty index over time. The link among inequality trend, re-ranking of individuals and individuals’ income growth is explained by isolating source and subgroup contributions to the determinants of inequality change over time. We show that the poverty change over time depends on re-ranking of individuals and change in relative disparities between individuals’ poverty gaps. The determinants of change in poverty inequality are then decomposed by source and subgroup, yielding a three-way decomposition which merges time, source and subgroup dimensions of decomposition.
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