Wealth Inequality: Theory, Measurement and Decomposition

38 Pages Posted: 2 Jan 2018

See all articles by James B. Davies

James B. Davies

University of Western Ontario - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Nicole M. Fortin

University of British Columbia (UBC) - Department of Economics

Thomas Lemieux

University of British Columbia (UBC) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: December / Décembre 2017

Abstract

English Abstract: This paper reviews the basic principles of inequality measurement, underlining the advantages and shortcomings of alternative measures from a theoretical standpoint and in the context of the study of the distribution of wealth. Adopting the two most popular measures, the Gini index and the P‐shares, the paper documents wealth inequality in Canada using the 1999, 2005 and 2012 Survey of Financial Security (SFS). It carries out several decompositions with covariates, featuring DFL‐type reweighting methods and Gini and P‐shares RIF regressions. The latter parallel decompositions deepen our understanding of how changes in socio‐demographic characteristics, including the compensating role of family formation and human capital, impact wealth inequality.

French Abstract: Cet article débute par une revue des principes fondamentaux de la mesure de l’inégalité de la richesse, en soulignant les avantages et inconvénients de diverses mesures d’un point de vue théorique. Adoptant les deux mesures les plus populaires, l’indice de Gini et les fractiles, cet article documente l’évolution de l’inégalité de la richesse au Canada en utilisant les données des enquêtes sur la sécurité financière (ESF) de 1999, 2005 et 2012. Puis il réalise plusieurs types de décompositions, incluant les méthodes basées sur la repondération de type DFL et les RIF régressions pour l’indice de Gini et les fractiles. Ces dernières approfondissent notre compréhension de la façon dont les changements de caractéristiques sociodémographiques ont un impact sur l’inégalité de la richesse, notamment le rôle compensatoire de la formation des ménages et du capital humain.

Suggested Citation

Davies, James and Fortin, Nicole M. and Lemieux, Thomas, Wealth Inequality: Theory, Measurement and Decomposition (December / Décembre 2017). Canadian Journal of Economics/Revue canadienne d'économique, Vol. 50, Issue 5, pp. 1224-1261, 2017, Available at SSRN: https://ssrn.com/abstract=3094778 or http://dx.doi.org/10.1111/caje.12313

James Davies (Contact Author)

University of Western Ontario - Department of Economics ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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Nicole M. Fortin

University of British Columbia (UBC) - Department of Economics ( email )

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Thomas Lemieux

University of British Columbia (UBC) - Department of Economics ( email )

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Vancouver, BC V6T 1Z1
Canada

National Bureau of Economic Research (NBER)

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