A consistency check of the World Income Inequality Database in favour of common readers

Amlan Majumder () and Takayoshi Kusago ()
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Amlan Majumder: University of North Bengal
Takayoshi Kusago: Kansai University

SN Business & Economics, 2021, vol. 1, issue 7, 1-17

Abstract: Abstract The World Income Inequality Database (WIID) is widely used by common readers of economic inequality. It reports, among other, information on Gini coefficient computed from micro-data and corresponding decile and quintile income or consumption distributions. As a part of common practice, a reader may look at a reported Gini and visually examine the corresponding grouped distributions. The precise objective of this paper is to examine whether such a practice of linking of Gini coefficient based on micro-data and the corresponding grouped income distributions is always feasible. A reported Gini may not always correspond to the displayed grouped distribution, as it should be. In the quest of performing a consistency check, if Gini coefficient is computed from the grouped distributions, one may end up finding some non-negligible number of absurd figures, which cannot be explained by our common understanding of the existing literature. One needs to identify and filter out such unusual cases from the dataset to make it useable throughout. As grouping of micro-data into deciles or quintiles involves some sort of shortfall comprising of underestimation and downward bias in Gini coefficient, and as probable magnitude of these can be set, such information may be used to filter out the cases with discrepancies. After a thorough analysis of four different versions of WIID, it is found that nearly 6–11% cases are unusual relating to quintile and decile datasets, respectively in WIID of 6 May 2020 with a gradual improvement of data quality from WIID 3.4 of 2017.

Keywords: Consistency check; Decile and quintile income distributions; Grouping of income inequality data; Micro-Gini coefficient; World Income Inequality database (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s43546-021-00094-1

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