Skip to main content

Advertisement

SpringerLink
Log in

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

  • Published:
The Journal of Economic Inequality Aims and scope Submit manuscript

An Erratum to this article was published on 29 March 2008

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.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  1. Alesina, Alberto, Angeletos, George-Marios: Fairness and redistribution: US versus Europe. Am. Econ. Rev. 95(4), 960–980 (2005)

    Article  Google Scholar 

  2. Almeida dos Reis, José G., Paes de Barros, Ricardo: Wage inequality and the distribution of education: A study of the evolution of regional differences in inequality in metropolitan Brazil. J. Dev. Econ. 36, 117–143 (1991)

    Article  Google Scholar 

  3. Atkinson, Anthony B.: On the measurement of inequality. J. Econ. Theory 2, 244–263 (1970)

    Article  Google Scholar 

  4. Atkinson, Anthony B.: Bringing income distribution in from the cold. Econ. J. 107(441), 297–321 (1997)

    Article  Google Scholar 

  5. Banerjee, Abhijit, Duflo, Esther: Inequality and growth: What can the data say? J. Econ. Growth 8(3), 267–299 (2003)

    Article  Google Scholar 

  6. Banerjee, Abhijit, Newman, Andrew: Occupational choice and the process of development. J. Polit. Econ. 101(2), 274–298 (1993)

    Article  Google Scholar 

  7. Bénabou, Roland: Unequal societies: Income distribution and the social contract. Am. Econ. Rev. 90(1), 96–129 (2000)

    Article  Google Scholar 

  8. Blau, Francine, Khan, Lawrence: International differences in male wage inequality: Institutions versus market forces. J. Polit. Econ. 104(4), 791–837 (1996)

    Article  Google Scholar 

  9. Blinder, Alan S.: Wage discrimination: Reduced form and structural estimates. J. Hum. Resour. 8, 436–455 (1973)

    Article  Google Scholar 

  10. Bourguignon, François: Decomposable income inequality measures. Econometrica 47, 901–920 (1979)

    Article  Google Scholar 

  11. Bourguignon, François, Ferreira, Francisco H.G., Leite, Phillippe: Beyond Oaxaca–Blinder: Accounting for differences in household income distributions across countries. World Bank Policy Research Working Paper 2828, Washington, DC (2002) (April)

  12. Bourguignon, François, Ferreira, Francisco H.G., Lustig, Nora (eds.): The Microeconomics of Income Distribution Dynamics in East Asia and Latin America. The World Bank and Oxford University Press, Washington, DC (2004)

  13. Buhmann, B., Rainwater, L., Schmaus, G., Smeeding, T.: Equivalence scales, well-being, inequality and poverty: Sensitivity estimates across ten countries using the Luxembourg income study database. Rev. Income Wealth 34, 115–142 (1988)

    Article  Google Scholar 

  14. Calmfors, Lars, Driffill, John: Bargaining structure, corporatism and macroeconomic performance. Econ. Policy 6, 14–61 (1988), April

    Google Scholar 

  15. Cowell, Frank A.: On the structure of additive inequality measures. Rev. Econ. Stud. 47, 521–531 (1980)

    Article  Google Scholar 

  16. Cowell, Frank A., Jenkins, Stephen P.: How much inequality can we explain? A methodology and an application to the USA. Econ. J. 105, 421–430 (1995)

    Article  Google Scholar 

  17. DiNardo, John, Fortin, Nicole, Lemieux, Thomas: Labor market institutions and the distribution of wages, 1973–1992: A semi-parametric approach. Econometrica 64(5), 1001–1044 (1996)

    Article  Google Scholar 

  18. Donald, Stephen, Green, David, Paarsch, Harry: Differences in wage distributions between Canada and the United States: An application of a flexible estimator of distribution functions in the presence of covariates. Rev. Econ. Stud. 67, 609–633 (2000)

    Article  Google Scholar 

  19. Engerman, Stanley, Sokoloff, Kenneth: Factor endowments, institutions, and differentials paths of growth among new world economies. In: Haber Stephen (ed.) How Latin America Fell Behind. Stanford University Press, Stanford (1997)

    Google Scholar 

  20. Ferreira, Francisco H.G. (2001): Education for the masses?: The interaction between wealth, educational and political inequalities. Econ. Transit. 9(2), 533–552

    Article  Google Scholar 

  21. Ferreira, Francisco H.G., Lanjouw, Peter, Neri, Marcelo: A robust poverty profile for Brazil using multiple data sources. Rev. Bras. Econ. 57(1), 59-92 (2003)

    Article  Google Scholar 

  22. Forbes, Kristin J.: A reassessment of the relationship between inequality and growth. Am. Econ. Rev. 90(4), 869–887 (2000)

    Article  Google Scholar 

  23. Foster, J., Greer, J., Thorbecke, E.: A class of decomposable poverty measures. Econometrica 52, 761–765 (1984)

    Article  Google Scholar 

  24. Gosling, Amanda, Machin, Steve, Meghir, Costas: The changing distribution of male wages in the UK. Rev. Econ. Stud. 67, 635–686 (2000)

    Article  Google Scholar 

  25. Henriques, Ricardo: Desigualdade e Pobreza no Brasil. IPEA, Rio de Janeiro (2000)

    Google Scholar 

  26. Hoffman, Rodolfo: Desigualdade no Brasil: A Contribuição das Aposentadorias. UNICAMP, Instituto de Economia, mimeo (2001)

  27. Hyslop, Dean R., Maré, Dadid C.: Understanding New Zealand’s changing income distribution, 1983–1998: A semi-parametric analysis. Economica 72, 469–495 (2005)

    Article  Google Scholar 

  28. Juhn, Chinhui, Murphy, Kevin, Pierce, Brooks: Wage inequality and the rise in returns to skill. J. Polit. Econ. 101(3), 410–442 (1993)

    Article  Google Scholar 

  29. Kuznets, Simon: Economic growth and income inequality. Am. Econ. Rev. 45(1), 1–28 (1955)

    Google Scholar 

  30. Lam, David, Levinson, Deborah: Age, experience, and schooling: Decomposing earnings inequality in the United States and Brazil. Sociol. Inq. 62(2), 218–145 (1992)

    Article  Google Scholar 

  31. Lemieux, Thomas: Decomposing changes in wage distributions: A unified approach. Can. J. Econ. 35(4), 646–688 (2002)

    Article  Google Scholar 

  32. Machado, José A.F., Mata, José: Earning functions in Portugal 1982–1994: Evidence from quantile regressions. Empir. Econ. 26(1), 115–134 (2001)

    Article  Google Scholar 

  33. Milanovic, Branko: Income, Inequality, and Poverty during the Transition from Planned to Market Economy. The World Bank, Washington (1998)

    Google Scholar 

  34. Mincer, Jacob: Schooling, Experience, and Earnings. NBER, New York (1974)

    Google Scholar 

  35. Oaxaca, Ronald: Male–female wage differentials in urban labor markets. Int. Econ. Rev. 14, 673–709 (1973)

    Article  Google Scholar 

  36. Ravallion, Martin, Chen, Shaohua: Measuring pro-poor growth. Econ. Lett. 78, 93–99 (2003)

    Article  Google Scholar 

  37. Sacconato, André L., Menezes Filho, Naércio: A Diferença Salarial entre os Trabalhadores Americanos e Brasileiros: Uma Análise com Micro Dados. Universidade de São Paulo, Instituto de Pesquisas Econômicas, TD No. 25/2001 (2001)

  38. Shorrocks, Anthony F.: The class of additively decomposable inequality measures. Econometrica 48, 613–625 (1980)

    Article  Google Scholar 

  39. World Bank: World Development Report 2006: Equity and Development. Oxford University Press and the World Bank, New York (2005)

    Book  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. The World Bank, 1818 H Street, NW, Washington, DC, 20433, USA

    François Bourguignon, Francisco H. G. Ferreira & Phillippe G. Leite

Authors
  1. François Bourguignon
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Francisco H. G. Ferreira
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Phillippe G. Leite
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Francisco H. G. Ferreira.

Additional information

An erratum to this article can be found at http://dx.doi.org/10.1007/s10888-008-9084-1

Rights and permissions

Reprints and permissions

About this article

Cite this article

Bourguignon, F., Ferreira, F.H.G. & Leite, P.G. Beyond Oaxaca–Blinder: Accounting for differences in household income distributions. J Econ Inequal 6, 117–148 (2008). https://doi.org/10.1007/s10888-007-9063-y

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10888-007-9063-y

Keywords

JEL Classification Codes

Search

Navigation