Evaluating Distributional Differences in Income Inequality

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Income and wage inequality between gender and other social groups is commonly evaluated by the difference in average income or the decomposition of the total amount of inequality into between-group and within-group components using an inequality measure such as the Theil index. Either approach ignores the dispersional difference between social groups, often manifested in glass-ceiling and glass-floor effects. The author introduces a refined Theil decomposition that offers two ways of capturing such between-group distributional differences. An analysis of income data from 10 European countries illustrates the usefulness of the proposed evaluation and decomposition methods.