Beyond Oaxaca-Blinder: Accounting for differences in household income distributions

François Bourguignon, Francisco Ferreira and Philippe G. Leite
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Philippe G. Leite: Banque Mondiale - Banque Mondiale

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Abstract: This paper develops a method to decompose differences across distributions of household income, based on counterfactual distributions that 'lie between' the actually observed distributions. Our approach decomposes differences between any two income distributions (or functionals such as inequality or poverty measures) into shares due to price effects; occupational structure effects; and endowment effects. Comparing the household income distributions of the USA and Brazil in 1999, we find that most of Brazil's excess inequality (of 13 Gini points) is accounted for by underlying inequalities in the distributions of education and of non-labor income, notably pensions (between four and six Gini points each). Steeper returns to education in Brazil also make an important contribution (of two to five points). Differences in occupational structure and in racial and demographic composition are much less important.

Keywords: Income distribution; Inequality decomposition; Micro-simulation (search for similar items in EconPapers)
Date: 2008-06
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Citations: View citations in EconPapers (77)

Published in Journal of Economic Inequality, 2008, 6 (2), pp.117-148. ⟨10.1007/s10888-007-9063-y⟩

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Journal Article: Beyond Oaxaca–Blinder: Accounting for differences in household income distributions (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00754283

DOI: 10.1007/s10888-007-9063-y

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