Accounting for Income Distribution Trends: A Density Function Decomposition Approach

27 Pages Posted: 20 May 2004

See all articles by Stephen P. Jenkins

Stephen P. Jenkins

London School of Economics & Political Science (LSE) - Department of Social Policy and Administration; Institute for the Study of Labor (IZA); University of Essex - Institute for Social and Economic Research (ISER)

Philippe Van Kerm

Luxembourg Institute of Socio-Economic Research (LISER)

Date Written: May 2004

Abstract

This paper develops methods for decomposing changes in the income distribution using subgroup decompositions of the income density function. Overall changes are related to changes in subgroup shares and changes in subgroup densities, where the latter are broken down further using elementary transformations of individual incomes. These density decompositions are analogous to the widely-used decompositions of inequality indices by population subgroup, except that they summarize multiple features of the income distribution (using graphs), rather than focusing on a specific feature such as dispersion, and are not dependent on the choice of a specific summary index. Nonetheless, since inequality and poverty indices can be expressed as PDF functionals, our density-based methods can also be used to provide numerical decompositions of these. An application of the methods reveals the multi-faceted nature of UK income distribution trends during the 1980s.

Keywords: income distribution, inequality, density functions, subgroup decompositions

JEL Classification: C14, D31, D33

Suggested Citation

Jenkins, Stephen P. and Van Kerm, Philippe, Accounting for Income Distribution Trends: A Density Function Decomposition Approach (May 2004). Available at SSRN: https://ssrn.com/abstract=546111

Stephen P. Jenkins

London School of Economics & Political Science (LSE) - Department of Social Policy and Administration ( email )

Houghton Street
London, England WC2A 2AE
United Kingdom

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

University of Essex - Institute for Social and Economic Research (ISER) ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom
+44 120 687 3374 (Phone)
+44 120 687 3151 (Fax)

Philippe Van Kerm (Contact Author)

Luxembourg Institute of Socio-Economic Research (LISER) ( email )

11, Porte des Sciences
Esch-sur-Alzette, L-4366
Luxembourg

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