Income Inequality in Poland and the United Kingdom. Decomposition of the Theil Index

The aim of the article is to compare inequalities of the household disposable income in Poland and the UK. We analyse the Theil index for types of households in 2005 and 2014. We also aim at finding out how household types contribute to the level of overall income inequality in the UK and Poland. We calculate and decompose the Theil indices based on the equivalised disposable household income from the European Union Statistics on Income and Living Conditions (EU-SILC) database. We find that “two adults below 65 with no dependent children” household group is the main contributor to the overall Theil index in both countries. We also conclude that the between-group component of the Theil index decreases in Poland and increases in the UK and, in effect, in 2014, it is twice as high in the UK as in Poland.