Subgroup Decomposition of the Gini Coefficient: A New Solution to an Old Problem

Abstract

We derive a novel decomposition of the Gini coefficient into within- and between-group inequality terms that sum to the aggregate Gini coefficient. This decomposition is derived from a set of axioms that ensure desirable behavior for the within- and between-group inequality terms. The decomposition of the Gini coefficient is unique given our axioms, easy to compute, and can be interpreted geometrically.