A Unified Approach to Measuring Poverty and Inequality
may be detrimental to a nation’s welfare. Suppose there are two groups in a region and the overall income inequality is moderate. After the groups are decomposed into within-group and between-group terms, if the withingroup inequality is low and the between-group inequality is very high, then the society is polarized. This might increase the possibility of social conflict, as discussed in chapter 4. Thus, merely looking into the overall inequality figures may not reveal this potential problem to the policy maker. The type of analysis conducted in this table may turn out to be crucial.
Decomposition of Generalized Entropy Measures The Gini coefficient is not decomposable in the usual way because it has an overlap term. Thus, it is important to look at the usual decomposition (within-group and between-group inequalities) using additively decomposable measures. With this objective, table A.6 analyzes the decomposition of inequality across urban and rural areas and across geographic regions. The analysis is based on three different types of generalized entropy (GE) measures: the first Theil measure denoted by GE(1), the second Theil
Table A.6: Decomposition of Generalized Entropy Measures by Geography 2003 GE(0) 1
Total
GE(1)
2006 GE(2)
GE(0)
GE(1)
Change GE(2)
GE(0)
GE(1)
GE(2)
A
B
C
D
E
F
G
H
I
20.8
20.0
24.2
21.8
21.5
27.8
1.1
1.6
3.6
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.1
0.1
0.0
0.0
0.0
−0.1
−0.1
−0.1
20.8
19.9
24.2
21.8
21.5
27.8
1.1
1.6
3.7
1.3
1.2
1.2
0.8
0.8
0.8
−0.4
−0.4
−0.4
6.1
6.2
5.0
3.8
3.7
2.8
−2.3
−2.5
−2.2
19.5
18.7
23.0
21.0
20.7
27.1
1.5
2.0
4.1
Urban and rural 2 3 4
5 6 7
Between-group inequality Between as a share of total (%) Within-group inequality Geographic regions Between-group inequality Between as a share of total (%) Within-group inequality
Source: Based on ADePT Poverty and Inequality modules using Integrated Household Survey of Georgia 2003 and 2006. Note: GE = generalized entropy.
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