Datt-Ravallion Decomposition

The Datt-Ravallion decomposition, introduced by Gaurav Datt and Martin Ravallion in 1992, separates the observed change in a poverty measure between two dates into a growth component — the change attributable to a shift in mean income holding the relative distribution fixed — and a redistribution component — the change attributable to a shift in the Lorenz curve holding mean income fixed. A residual captures the interaction between the two. It became the standard way to ask whether falling poverty was driven by rising average incomes or by changes in inequality, and underlies the empirical literature on pro-poor growth.