Inequality decomposition by population subgroups for ordinal data

We present a class of decomposable inequality indices for ordinal data (e.g. self-reported health survey). It is characterized by well-known inequality axioms (e.g. scale invariance) and a decomposability axiom which states that an index can be represented as a function of inequality values in subgroups and subgroup sizes. The only decomposable indices are strictly monotonic transformations of the weighted average of frequencies in categories. Among the indices proposed in the literature only the absolute value index (Abul Naga and Yalcin, 2008; Apouey, 2007) is decomposable. As an empirical illustration we calculate regional contributions to overall health inequality in Switzerland.