Evaluating Distributional Differences in Income Inequality

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.