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IZA
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A Review of Decomposition of Income Inequality
by
Almas Heshmati
(July 2004)
revised version published in: A. Heshmati (Ed), Global Trends in Income Inequality, Hauppauge, NY: Nova Science Publishers, 2007, 27-48
Abstract:
This paper is a review of recent developments of parametric and non-parametric approaches
to decompose inequality by subgroups, income sources, causal factors and other unit
characteristics. Different methods of decomposing changes in poverty into growth,
redistribution, poverty standard and residual components are described. In parametric
approaches the dynamics of income accounting for transitory and permanent changes in
individual and household earnings conditional of various covariates are also reviewed.
Statistical inferences for inequality measurement including delta and bootstrapping and other
methods to provide estimates of the sampling distribution are presented. These issues are
important in the design of policy measures and expectations about their impacts on earnings
inequality and poverty reductions.
Text: See Discussion Paper No. 1221 
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