A decomposition method for analysing inter-group income differences with an application to Catholics and Protestants in Northern Ireland

Abstract

This paper argues that inter-group disparities in economic welfare are best measured by intercommunity income differences and it proceeds to analyse the structure of such income differences through the decomposition of the ratio of the respective group incomes. Simulation experiments then attempt to uncover the relationship between changes in unemployment rates and (consequent) changes in the Catholic-Protestant income ratio in Northern Ireland. The results of these experiments show that reductions in the overall unemployment rate - if unaccompanied by improvements in the unemployment position of Catholics relative to that of Protestants - would have the least effect on the relative income of Catholics.