Decomposing regional income inequality in China and Indonesia using two-stage nested Theil decomposition method |
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Authors: | Takahiro Akita |
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Affiliation: | (1) International Development Program, International University of Japan, Yamato-machi, Minami Uonuma-gun, Niigata, 949-7240, Japan (e-mail: akita@iuj.ac.jp), JP |
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Abstract: | The objective of this paper is to present an inequality decomposition method, the two-stage nested Theil decomposition method,
which is an extension of the ordinary one-stage Theil decomposition method. The method is analogous to a two-stage nested
design in the analysis of variance (ANOVA). It considers the three-level hierarchical structure of a country: region-province-district,
and decomposes overall regional inequality, as measured by Theil indices based on district-level mean incomes, into three
components: the between-region, between-province, and within-province inequality components. The within-province component
is a weighted-average of within-province income inequalities for each province, while the between-province component is a
weighted-average of between-province income inequalities within each region. The method uses a district as the underlying
regional unit to measure regional income inequality, rather than a province, and thus can analyze the contribution of within-province
inequalities as well as between-province and between-region inequalities to the overall regional income inequality in a coherent
framework. This paper applies the two-stage nested Theil decomposition method to district-level income and population data
in China and Indonesia and explores factors determining regional income inequality in China and Indonesia.
Received: October 2000/Accepted: June 2002
The author is grateful to the Foundation of International Education (Kokusai Kyoiku Zaidan) and Japan Society for the Promotion
of Science (Grant-in-Aid for Scientific Research No. 12630073) for their financial support, and to anonymous referees for
helpful comments. |
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Keywords: | JEL classification: O15 C8 |
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