The Informational Index of Income Inequality

Paulo L. dos Santos ()
Additional contact information
Paulo L. dos Santos: Department of Economics, New School for Social Research

No 2211, Working Papers from New School for Social Research, Department of Economics

Abstract: A new informational index of income inequality is proposed. Based on a combinatorial characterisation of entropy and on its generalisation by multivariate measures of co-information, the index addresses a limiting analytical choice embedded in Theil's two indices of income inequality. This yields a positive measure of inequality of opportunity in income-generating processes, defined in relation to probabilities that the population-wide distribution of income describes the set of possible income levels facing specified sub-groups of that population. Its measure across a population is given when sub-groups consist of each individual. This can be successively decomposed linearly by sub-groups defined by covariates of income. In those instances, the index also provides informational measures of phenomenological association and interaction between income and those covariates. On those bases the index improves on mean-log deviations as measures of "luck egalitarian" notions of equity; casts new light on and uncovers new properties in the Theil-Finezza index of segregation; offers a non-parametric generalisation of the Kitagawa-Oaxaca-Blinder decomposition; and lays new conceptual foundations for work on the determinants and normative content of patterns of income differentiation in decentralised market economies.

Keywords: Inequality indices; income distribution; information theory (search for similar items in EconPapers)
JEL-codes: C18 D31 D63 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2022-11
New Economics Papers: this item is included in nep-hme
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.economicpolicyresearch.org/econ/2022/NSSR_WP_112022.pdf First version, 2022 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:new:wpaper:2211

Access Statistics for this paper

More papers in Working Papers from New School for Social Research, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Mark Setterfield ().