Contributions from Factor Components to the Gini, Bonferroni and Zenga inequality indexes: an application to income data from EU countries

In this work we apply a new approach to assess contributions from factor components to income inequality. The new approach is based on the insight that most (synthetic) inequality indexes may be viewed as (weighted) averages of point inequality indexes, which measure inequality between population subgroups identified by income. Assessing the contribution of factor components to point inequality indexes is usually an easy task and, using these contributions, it is straightforward to define contributions to the corresponding (synthetic) overall inequality indexes as well. As we shall show through an analysis of income data from Eurostat’s European Community Household Panel Survey (ECHP), the approach based on point inequality indexes gives rise to readily interpretable results, which, we believe, is an advantage over other methods that have been proposed in literature.