Inequality foundations of concentration measures: an application to the Hannah-Kay indices

In this paper we connect, in a consistent way, the Hannah-Kay concentration indices with some inequality measures coming from the income distribution literature. We isolate the inequality component underlying the concentration measures, providing an explicit additive decomposition of the change in concentration into the change in its two components: inequality and the number of firms. Finally, our proposed decomposition is illustrated by means of an empirical example, which proves to be useful to identify the sources of a change in sectoral concentration along time