Decomposition procedures for distributional analysis: a unified framework based on the Shapley value

Shorrocks, Anthony

doi:10.1007/s10888-011-9214-z

Cited by 776 publications

(725 citation statements)

References 27 publications

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“…The importance of a circumstance is measured as the normalized average of all such comparisons. 8 The Shapley-value decomposition approach (Shorrocks, 1999) has several benefits. Among others, it results in an additive decomposition of inequality, i.e., the sum of all contributions is the value of overall inequality.…”

Section: Methodsmentioning

confidence: 99%

Equality of opportunity and the distribution of long-run income in Sweden

2011

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Section: Methodsmentioning

confidence: 99%

Equality of opportunity and the distribution of long-run income in Sweden

2011

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“…As explained by Shorrocks (2013), the Shapley value procedure extracts the marginal effect on a poverty/inequality statistic I of eliminating each of the contributory factors in sequence, and then assigns to each factor the average of its marginal contributions in all possible elimination sequences. In the present case, if the homogeneity property is verified, the 'policy gap' and the 'other gaps' under the Shapley decomposition are thus obtained by averaging the contributions from the two decompositions set out above.…”

Section: Y C )]mentioning

confidence: 99%

Learning from your neighbor: tax-benefit systems swaps in Latin America

2017

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Over the last decades, Latin American countries have experienced a noticeable decrease in income inequality. While this trend is mainly associated with a decline in wage inequality, progressive reforms of the tax-benefit systems of the region may have played a role. While redistributive systems in Latin America are still in their infancy, they are constantly expanding and do so at different pace in the region. To investigate this point in a comparative way, the present study exploits newly developed tax-benefit microsimulation models for Ecuador and Colombia. These two neighboring countries show contrasted situations in terms of income distribution and we characterize the extent to which this difference is explained by different tax-benefit systems. The comparative nature of our microsimulation models allows us to swap tax-benefit systems between countries to produce counterfactual simulations whereby the system of a country is applied to the population of the other. In this way, we can decompose the total country difference in income distribution to extract the role of different tax-benefit policies. We confirm that the Ecuadorean system is more redistributive and quantify the difference: if the Ecuadorean system was applied to the Colombian population, the Gini coefficient would be reduced by 1.7 points in Colombia. Headcount poverty would decrease by around 10% and the intensity of poverty by up to 14.7%. This analysis contributes to the recent literature on the redistributive role of taxbenefit systems in Latin America and highlights the role of microsimulation techniques to show how countries in the region can learn from each other in order to improve social protection and reduce income inequality.

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“…As there are no clear arguments for preferring one particular combination over another, all variants should be covered. Bargain and Callan (2010) adopt the Shorrocks-Shapley approach (Shorrocks, 2013) to summarise various combinations, essentially averaging the effect of a given component across all combinations. In this way, results conditional on household characteristics in each period are given equal weights.…”

Section: Decomposing Static Policy Effectsmentioning

confidence: 99%

Microsimulation and Policy Analysis

Figari

Paulus

Sutherland

2015

Handbook of Income Distribution

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ISER Working Paper Series www.iser.essex.ac.uk Microsimulation and Policy AnalysisNon-technical summary This paper is prepared as a chapter forthcoming in the Handbook of Income Distribution, Volume 2 (edited by A. B. Atkinson and F. Bourguignon, Elsevier-North Holland). Microsimulation methods are increasingly used to study the effects of policies on the income distribution contributing both to policy debates and academic literature. In general terms, microsimulation refers to modelling changes in the state or behaviour of micro-level units. We provide an overview of approaches that address questions related to the impact of taxbenefit policies on household income distribution. We first discuss how microsimulation modelling contributes to the analysis of the income distribution more broadly, pointing out that it can enrich survey and administrative data by checking its consistency, adding further details and enhancing analytical flexibility. In addition, it provides the basis for calculating indicators that cannot otherwise be estimated directly from micro-data such as measures of work incentives, net support for children and automatic stabilisers embedded in tax-benefit systems. We then focus more specifically on the role of microsimulation in policy evaluation. Taxbenefit models can provide information on household disposable income and its components under various policy scenarios and as such constitute a unique tool for ex ante policy analysis, though equally can be used for ex post analysis. We review the formal framework underlying such microsimulation-based decomposition analysis of income distribution and suggest a broader perspective to accommodate a wider range of applications. Our main emphasis is on static modelling methods, though we also consider extensions accounting for behavioural reactions and links with macroeconomic models. As microsimulation models are often concerned with current and future policies, we discuss various approaches to predict the income distribution given that data providing information on the current situation becomes available with a time lag, distinguishing between nowcasting and forecasting. We emphasise the role of comparative analysis as cross-country differences in tax-benefit systems and population structures provide a basis to assess the robustness of results and generalise conclusions. We provide empirical illustrations drawing mainly on analysis using the EU-wide tax-benefit model EUROMOD. Covering 27 countries and made generally accessible this is now one of the most widely used models. There are many remaining challenges to providing estimates of the effects of policy and policy changes that can be used with confidence within policy analysis and we consider three major issues: reconciling the simulated income distribution and that measured using the original micro-data; accounting for benefit non take-up and tax non-compliance, as well as validating and assessing the statistical reliability of microsimulation estimates. While our main focus is on the distributio...

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Decomposition procedures for distributional analysis: a unified framework based on the Shapley value

Cited by 776 publications

References 27 publications

Equality of opportunity and the distribution of long-run income in Sweden

Equality of opportunity and the distribution of long-run income in Sweden

Learning from your neighbor: tax-benefit systems swaps in Latin America

Microsimulation and Policy Analysis

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