Divergence functions are measures of distance or dissimilarity between probability distributions that serve various purposes in statistics and applications. We propose decompositions of Wasserstein and Cramér distances—which compare two distributions by integrating over their differences in distribution or quantile functions—into directed shift and dispersion components. These components are obtained by dividing the differences between the quantile functions into contributions arising from shift and dispersion, respectively. Our decompositions add information on how the distributions differ in a condensed form and consequently enhance the interpretability of the underlying divergences. We show that our decompositions satisfy a number of natural properties and are unique in doing so in location-scale families. The decompositions allow us to derive sensitivities of the divergence measures to changes in location and dispersion, and they give rise to weak stochastic order relations that are linked to the usual stochastic and the dispersive order. Our theoretical developments are illustrated in two applications, where we focus on forecast evaluation of temperature extremes and on the design of probabilistic surveys in economics.

The convergence of economic growth is analyzed for regions of the European Union and the Eurozone. Using recent approaches to data-driven identification of countries’ club membership, considerable variation is found in club composition across countries and time, and a nonparametric approach is used to analyze and explain this variation.