Measuring inequality: One size does not fit all

Sita Slavov and Benjamin Ho

AEI Economic Perspectives, 2014

Abstract: Statistics focusing on annual household-level income indicate that inequality has increased in the United States in recent decades. Are these measures accurate? Inequality has traditionally been calculated in the United States in terms of annual cash income alone, but other, more comprehensive points of measurement should be considered. For maximum accuracy, income should include the value of in-kind benefits and be measured over a lifetime rather than a year. But even this adjusted number is inadequate to assess fairness, which requires looking at a broader picture of overall well-being that includes income mobility, access to education, consumption, leisure, and health. Additionally, we must develop better measures of opportunity, which is a more accurate indicator of well-being than income distribution. Broadening the definition of and approach to inequality would help build more opportunity and result in more useful policy.

Keywords: Income inequality; opportunity; Inequality; consumption tax; AEI Economic Perspectives; Policy Papers (search for similar items in EconPapers)
JEL-codes: A (search for similar items in EconPapers)
Date: 2014
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