Decomposition of Gini coefficients by class: a new approach

Abstract

When Gini coefficients are decomposed by class (e.g. occupation, sex, region, and so on, it is possible to examine how income inequality can be measured by its class components: intra-class, inter-class and overlapped. In the literature, there have been many studies on the decomposition methodology but most methods are either inflexible or too onerous for empirical analysis. This paper develops a new approach to overcome the shortcomings of existing studies. An example using the most recent Chinese rural income data is provided to demonstrate how this method can be applied to study regional income inequality.