Determinants of Inequality in Selected SEE Countries: Results from Shapley Value Decompositions


wiiw Balkan Observatory Working Paper No. 84,

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In this paper we provide a comparative analysis of inequality in household consumption per capita in four South-Eastern European countries, Albania, Bosnia & Herzegovina, Bulgaria, and Serbia. The analysis is based on a largely consistent dataset derived from the World Bank’s Living Standards Measurement Study (LSMS) providing data for at least two years for each of these countries and a comparable set of variables. We apply inequality decomposition methods based on regression analysis and variants of the Shapley value approach. We also present results from related methods like a decomposition of the explained variance using different approaches for comparisons. The results suggest that three groups of variables are particularly important for explaining patterns of inequality; these are socio-demographic variables, employment status and education. Regional aspects and nationality or ethnicity plays a less important role though there are some country differences.


Keywords: Inequality decomposition, Gini, Shapley value, Western Balkan countries

JEL classification: C20, D63

Countries covered: SEE