Cross-country inequalities in welfare and its decomposition by Sen factors: the virtues of the Theil index

Juan Duro

Applied Economics Letters, 2008, vol. 15, issue 13, 1041-1045

Abstract: In this study a new decomposition of the Theil index is proposed using multiplicative factors, which improves on that suggested in Duro (2001), and that, in particular, makes it possible to obtain, in isolation, the role attributable to the elements of factorial correlation. The Theil index, as a referential index in analysis, seems more attractive to us than log variance (Ezcurra and Pascual, 2005) for a variety of reasons. The application of the said decomposition for the analysis of international inequalities in terms of welfare levels, taking the Sen's factors (Sen, 1974, 1976), demonstrates that the bulk of these are determined by disparities in income per capita as well as their recent decrease.

Date: 2008
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DOI: 10.1080/13504850600993507

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