How Much Inequality Can We Explain? A Methodology and an Application to the United States

The authors develop two simple measures of how much inequality is explained by individual population characteristics or groups of characteristics, analogous to R[superscript 2] in regression analysis. The authors investigate the measures' empirical implementation using several alternative theoretically consistent approaches to inequality decomposition. Results are illustrated using U.S. PSID income data. Copyright 1995 by Royal Economic Society.