Decomposing Income Inequality by Population Subgroups: A Generalization

This paper proposes a generalized approach to the issue of decomposing inequality by population subgroups. This generalization uses the concept of Shapley value decomposition and takes into account the fact that either the between or the within groups inequality may be considered as residual terms, that the population size of the subgroups may have an impact on inequality and finally that there are various ways of ranking the individuals when defining the Gini index of inequality. The paper presents an empirical illustration based on the 1998 Israeli Income Survey where the subgroups distinguished are the male- and female-headed households.