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Explaining the Increase in Inequality during the Transition: a Note

Explaining the Increase in Inequality during the Transition: a Note Economics of Transition Volume 8 (1) 2000, 251–252 Comment Explaining the increase in inequality during the transition: a note Robert Eastwood School of Social Sciences, University of Sussex, Brighton BN1 9QN, East Sussex, UK. This note identifies an error in Milanovic (1999) and discusses some implications. Milanovic points out – his equations (4) and (6) – that the Gini may be decomposed into three elements – a ‘within-group’ component, dependent on sectoral Ginis and population shares, a ‘between-group’ component, dependent on mean income gaps and population shares, and an ‘overlapping’ component (see also Lambert and Aronson, 1993). Assuming away sectoral mean income changes – as Milanovic does – the first-order effects of population shifts and changes in intra-sectoral Ginis on the non-overlapping part of the overall Gini (call this the ‘Gini-L’) can be obtained by total differentiation of the Gini decomposition equation. Thus, Milanovic’s equation (7) is intended to show the effect of a shift of workers from the state sector to the private sector, but in deriving this from (4) via (6), the fact that such a shift must change μ, overall mean income, is neglected. Correcting this adds an extra component (indicated in bold) to the penultimate http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Economics of Transition and Institutional Change Wiley

Explaining the Increase in Inequality during the Transition: a Note

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Publisher
Wiley
Copyright
Copyright © 2000 Wiley Subscription Services, Inc., A Wiley Company
ISSN
2577-6975
eISSN
2577-6983
DOI
10.1111/1468-0351.00043
Publisher site
See Article on Publisher Site

Abstract

Economics of Transition Volume 8 (1) 2000, 251–252 Comment Explaining the increase in inequality during the transition: a note Robert Eastwood School of Social Sciences, University of Sussex, Brighton BN1 9QN, East Sussex, UK. This note identifies an error in Milanovic (1999) and discusses some implications. Milanovic points out – his equations (4) and (6) – that the Gini may be decomposed into three elements – a ‘within-group’ component, dependent on sectoral Ginis and population shares, a ‘between-group’ component, dependent on mean income gaps and population shares, and an ‘overlapping’ component (see also Lambert and Aronson, 1993). Assuming away sectoral mean income changes – as Milanovic does – the first-order effects of population shifts and changes in intra-sectoral Ginis on the non-overlapping part of the overall Gini (call this the ‘Gini-L’) can be obtained by total differentiation of the Gini decomposition equation. Thus, Milanovic’s equation (7) is intended to show the effect of a shift of workers from the state sector to the private sector, but in deriving this from (4) via (6), the fact that such a shift must change μ, overall mean income, is neglected. Correcting this adds an extra component (indicated in bold) to the penultimate

Journal

Economics of Transition and Institutional Change – Wiley

Published: Mar 1, 2000

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