Discussion Paper

No. 2012-49 | October 01, 2012
The BIP Trilogy (Bipolarization, Inequality and Polarization): One Saga but Three Different Stories

Abstract

Inequality, bi-polarization and polarization are related but distinct concepts aiming at analysing the income distribution. This paper first recalls the main differences between these three notions of inequality, bipolarization and polarization. It then shows that a close look at the impact of various income sources on these three types of indicators confirms that indeed they measure three different features of an income distribution. The effect of the different income components on inequality, bipolarization and polarization is analyzed via what is known as the Shapley de-composition and the empirical illustration is based on 2008 data for Luxembourg.

JEL Classification

I31 D63 D31

Cite As

Joseph Deutsch, Alessio Fusco, and Jacques Silber (2012). The BIP Trilogy (Bipolarization, Inequality and Polarization): One Saga but Three Different Stories. Economics Discussion Papers, No 2012-49, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2012-49

Assessment



Comments and Questions


Anonymous - Reader Comment
October 30, 2012 - 09:29

Just a few suggestions to clarify further the empirical exercise:

- Negative contributions appear in 5 out of the 10 decomposition exercises.
Some readers may be interested in understanding why/how negative contributions may appear. Conceptually, it would seem, that the presence of an income source with a negative contribution ...[more]

... reduces inequality/bipolarization/polarization. The authors mention that in their discussion of the results and that's absolutely fine. But I think it would be interesting to provide a relatively simple hypothetical example to show how some sources may come up with positive contributions while some with negative ones in each of the three distributional concepts.

- In relation to that, since these contributions are computed using Shapley decompositions, it may be interesting to unpack the computation of one of the negative contributions in order to see how many components turn up negative and how many turn up positive. This might shed some light on what's going on behind a procedure that is certainly sensible, but may have a bit of a "black box" behaviour (that is, before we understand well what's going "inside").

- It may also be interesting to clarify whether the fact that the indices have different ranges/bounds (e.g. Gini between 0 and 1-1/n; Pg and Pfw can take negative values, etc.) may have an impact on the sign of the contributions. Maybe there is no relationship at all, but it might be worth exploring, checking.

Finally an editorial suggestion:

It may be aesthetically better (for many readers) to have the equations outside of their boxes.


Anonymous - Reader “The BIP Trilogy (Bipolarization, Inequality and Polarization): one saga but three different stories”
November 15, 2012 - 13:49

Here I attach my comments as a reader on the discussion paper “The BIP Trilogy (Bipolarization, Inequality and Polarization): one saga but three different stories”


Jacques Silber - Reply to Comment 1
November 15, 2012 - 14:28

See attached file


Anonymous - Reader Comment
November 26, 2012 - 14:06

See attached file


Jacques Silber - Reply to Comment 2
December 03, 2012 - 15:48

See attached file


Jacques Silber - Reply to Comment 3
December 03, 2012 - 15:49

See attached file