Factor decomposition of income inequality change: Japan's regional income disparity from 1955 to 1998

Higashikata Takayuki

No 400, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: We propose a method for the decomposition of inequality changes based on panel data regression. The method is an efficient way to quantify the contributions of variables to changes of the Theil T index while satisfying the property of uniform addition. We illustrate the method using prefectural data from Japan for the period 1955 to 1998. Japan experienced a diminishing of regional income disparity during the years of high economic growth from 1955 to 1973. After estimating production functions using panel data for prefectures in Japan, we apply the new decomposition approach to identify each production factor’s contributions to the changes of per capita income inequality among prefectures. The decomposition results show that total factor productivity (residual) growth, population change (migration), and public capital stock growth contributed to the diminishing of per capita income disparity.

Keywords: Japan; Income distribution; Income inequality; Factor decomposition; Regional disparity (search for similar items in EconPapers)
JEL-codes: C63 O15 R12 (search for similar items in EconPapers)
Date: 2013-03-01
New Economics Papers: this item is included in nep-eff, nep-fdg, nep-pbe and nep-ure
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Citations: View citations in EconPapers (6)

Published in IDE Discussion Paper = IDE Discussion Paper, No. 400. 2013-03-01

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