We show how classic source-decomposition and subgroup-decomposition methods can be reconciled with regression methodology used in the recent literature. We also highlight some pitfalls that arise from uncritical use of the regression approach. The LIS database is used to compare the approaches...

The amp;apos'prediction approachamp;apos' proposed by Dearden, Machin and Reed (DMR) consists in (1) regressing the observed incomes of the child and parent families on separate sets of predetermined variables, and (2) regressing the childamp;apos's predicted income on that of the parents....