Between group inequality and targeted transfers
Wodon, Quentin T.
The author provides two extensions to Yitzhaki and Lerman's group decomposition of the Gini index. First, he analyzes stratification (within the group) and inequality (between groups) along several dimensions at once. This makes the determinants of inequality more understandable. Second, he derives the impact on the Gini of marginal changes in income or consumption by group. This can be used to evaluate targeted redistributive policies or to assess the impact of exogenous shocks by group. He applies the analysis to data from Bangladesh, with a focus on how inequality affects land ownership, education, and occupation. Education appears to be a stronger determinant of inequality than occupation, with land ownership ranking third. Marginal targeted transfers and taxes have more effect on redistribution when applied to education (from the well-educated to the illiterate) or occupation groups (from officials and managers to tenants and agricultural workers).
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