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Indices of redistributive effect and reranking

Working Paper 2009-147


Kakwani decomposition of redistributive effect into vertical and reranking terms is one of the most widely used tools in measurement of income redistribution. However, Urban (2009) argues that the decomposition features some methodological problems and calls for its reinterpretation. This paper builds several different measurement models, constructs new indices of redistributive effect and reranking reinventing the existing ones, and establishes important propositions on the role of reranking in redistributive process. All that is done to prove that standard interpretation of Kakwani decomposition is misleading. New roles are suggested for the well-known indices of redistributive, vertical and reranking effect.

Authors: Ivica Urban .

Keywords: Kakwani decomposition, redistributive, reranking and vertical effects.
JEL: D63, H22, H23.