Accounting for Heterogeneity in Growth Incidence in Cameroon

This paper presents counterfactual
decompositions based on both the Shapley method and a
generalization of the Oaxaca-Blinder approach to identify
proximate factors that might explain differences in the
distribution of economic welfare in Cameroon in 1996-2007.
In particular, the analysis uses re-centered influence
function regressions to link the growth incidence curve for
2001-2007 to household characteristics and account for
heterogeneity of impact across quantiles in terms of the
composition (or endowment) effect and structural (or price)
effect. The analysis finds that the level of the growth
incidence curve is explained by the endowment effect while
its shape is driven by the price effect. Observed gains at
the bottom of the distribution are due to returns to
endowments. The rest of the gains are accounted for by the
composition effect. Further decomposition of these effects
shows that the composition effect is determined mainly by
household demographics while the structural effect is shaped
by the sector of employment and geography. Finally, analysis
of the rural-urban gap in living standards shows that, for
the poorest households in both sectors, differences in
household characteristics matter more than the returns to
those characteristics. The opposite is true for better-off households.