The BIP trilogy (bipolarization, inequality and polarization): One saga but three different stories

Inequality, bi-polarization and polarization are related but distinct concepts aiming at analysing the income distribution. This paper first recalls the main differences between these three notions of inequality, bipolarization and polarization. It then shows that a close look at the impact of various income sources on these three types of indicators confirms that indeed they measure three different features of an income distribution. The effect of the different income components on inequality, bipolarization and polarization is analyzed via what is known as the Shapley de-composition and the empirical illustration is based on 2008 data for Luxembourg.