DECOMPOSITION OF THE POPULATION DYNAMIC THEIL'S ENTROPY AND ITS APPLICATION TO FOUR EUROPEAN COUNTRIES

Abstract

In this paper we propose a modification of the Dynamic Theil's Entropy that considers the inequality in the whole population. We decompose it into three addends and we show how to compute them within a Markov model of income evolution. In this way the income inequality can be measured in the whole population and not only among a given number of classes in which the economic agents are classified. The model is implemented with statistics from Eurostat data applied on France, Germany, Greece and Italy. The results reveal different inequality behaviors characterizing the considered European countries.