Vertical and horizontal
inequality and poverty. 
The following figure
shows a scatter plot of household expenditures in Benin for 1996 and 1999. 



The difference in the observed inequality
between the two periods can be decomposed into vertical and horizontal inequality




y_{0 }
:_{ }Vector of incomes of the initial period
y_{1
}:_{ }Vector of incomes of the
final period
E(y_{1}y_{0}) : Vector of the expected incomes in the final
period
One can
then decompose the observed variation in poverty into vertical and
horizontal components of inequality such that: 


To compute all these components, we can use DAD to: 
 Generate the vector E(y_{1}y_{0}).
For this:
 use the application : Distribution=> non parametric regression
 choose the appropriate vectors and
parameters and click on the button GENERATE.




Once that this vector is generated, one can use the application Poverty=FGT
Index (with 2 distributions) to finalise the computation.
