Decomposition of Differences in Income Distributions Using Quantile Regression

The paper deals with microeconometric techniques useful for the study of differences between groups of objects, methods that go beyond simple comparison of average values. Techniques for the decomposition of differences in distributions by constructing counterfactual distributions were considered. Using the Machado-Mata quantile regression approach the empirical decomposition of the inequalities in income distributions of one-person households in urban and rural areas was performed. We employed data from the Household Budget Survey for Poland in 2012. It was found that the tendency towards increased income inequalities between urban and rural residents when moving to the right of the income distribution can be observed. The rural residents are at a disadvantage. The decomposition of the inequalities revealed a growing share of the part explained by different characteristics of people and a declining share of the unexplained part, associated with the evaluation of those characteristics.