Statistical analysis of inequality with decompositions: the Canadian experience

This study carries out a decomposition of Theil-entropy measures into a between-group component, based on factors such as education, age, gender, and marital status, and a component representing inequality within each group. We apply a bootstrapping technique to measures of inequality to enable statistical inference. Trends in household income inequality in Canada are investigated using data from 1991 to 1997 drawn from Survey of Consumer Finance. We find an evident trend toward increasing inequality of household incomes between the years 1991–1997, during which the economy was recovering from a steep recession. Although most of the increase in measured inequality is attributed to the `within-group' component, we find the change in `between-group' inequality to be significant for education, age, and marital status. First version received: May 2001/Final version received: September 2001