The limitations of negative incomes in the Gini coefficient decomposition by source
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Lerman and Yitzhaki (1985) developed a decomposition of the Gini coefficient by income source that has been extensively used in the literature. This method has strong limitations in the presence of negative incomes, which were not discussed by the original authors and have been widely overlooked in successive studies. Through theoretical argumentation and practical examples, this article shows that, when using negative incomes, (1) the original decomposition formulae become inappropriate, (2)...[Show more]
dc.contributor.author | Manero, Ana | |
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dc.date.accessioned | 2017-01-03T01:41:53Z | |
dc.date.available | 2017-01-03T01:41:53Z | |
dc.identifier.issn | 1350-4851 | |
dc.identifier.uri | http://hdl.handle.net/1885/111461 | |
dc.description.abstract | Lerman and Yitzhaki (1985) developed a decomposition of the Gini coefficient by income source that has been extensively used in the literature. This method has strong limitations in the presence of negative incomes, which were not discussed by the original authors and have been widely overlooked in successive studies. Through theoretical argumentation and practical examples, this article shows that, when using negative incomes, (1) the original decomposition formulae become inappropriate, (2) the marginal effects analysis may yield erroneous results and (3) the Pigou–Dalton ‘principle of transfers’ is not always met. This has critical implications for policy development, given that strategies based upon incorrect analyses could actually result in undesired greater income inequalities. The Gini source decomposition should be carefully applied by researchers and policymakers, especially in rural developing areas, where negative incomes are common due to financial losses from agricultural activities. | |
dc.format.mimetype | application/pdf | |
dc.publisher | Taylor & Francis | |
dc.rights | http://www.sherpa.ac.uk/romeo/issn/1350-4851/..." author can archive pre-print (ie pre-refereeing)" from SHERPA/RoMEO site (as at 3/01/17). This is an Original Manuscript of an article published by Taylor & Francis in Applied Economics Letters on 27/10/2016, available online: http://www.tandfonline.com/10.1080/13504851.2016.1245828 | |
dc.source | Applied Economics Letters | |
dc.subject | Gini coefficient | |
dc.subject | negative incomes | |
dc.subject | inequality | |
dc.subject | source decomposition | |
dc.subject | policy | |
dc.title | The limitations of negative incomes in the Gini coefficient decomposition by source | |
dc.type | Journal article | |
dc.date.issued | 2016-10-27 | |
local.publisher.url | http://www.routledge.com/ | |
local.type.status | Submitted Version | |
local.contributor.affiliation | Manero, A., Crawford School of Public Policy, The Australian National University | |
local.bibliographicCitation.startpage | 1 | |
local.bibliographicCitation.lastpage | 5 | |
local.identifier.doi | 10.1080/13504851.2016.1245828 | |
dcterms.accessRights | Open Access | |
Collections | ANU Research Publications |
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01_Manero_The_limitations_of_negative_incomes_2016.pdf | 468.43 kB | Adobe PDF |
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