Theil Inequality Decomposition
The Theil index, introduced by Henri Theil in 1967 by importing Shannon's information theory into economics, measures income inequality as the divergence between each unit's income share and its population share. Its defining advantage is exact additive decomposability: total inequality splits cleanly into a within-group component (inequality inside each subgroup) and a between-group component (inequality between subgroup means). Theil's T and its companion L (mean log deviation) are the two best-known members of the generalized-entropy class, which Anthony Shorrocks showed in 1980 to be the only inequality measures that are additively decomposable in this way.
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Sources
- Theil, H. (1967). Economics and Information Theory. Amsterdam: North-Holland. ISBN: 9780444814630
- Shorrocks, A. F. (1980). The class of additively decomposable inequality measures. Econometrica, 48(3), 613–625. DOI: 10.2307/1913126 ↗
How to cite this page
ScholarGate. (2026, June 22). Theil Index and Generalized-Entropy Decomposition of Inequality. ScholarGate. https://scholargate.app/en/economics/theil-inequality-decomposition
Which method?
Set this method beside its closest kin and read them side by side — the library lays the books on the table; the choice is yours.
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- Gini CoefficientSociology↔ compare
- Shapley Decomposition of InequalityEconomics↔ compare