 On the limitations of some current usages of the Gini IndexWorking Papers from Dalhousie University, Department of Economics Abstract: Recent popular and professional writing on economic inequality often fails to distinguish between change in a summary index of inequality, such as the Gini Index, and change in the inequalities which that index tries to summarize. This note constructs a simple two class example in which the Gini Index is held constant while the size of the rich and poor populations change, in order to illustrate how very different societies can have the same Gini index and produce very similar estimates of standard inequality averse Social Welfare Functions. The rich/poor income ratio can vary by a factor of over 12, and the income share of the top one per cent can vary by a factor of over 16, with exactly the same Gini Index. Focussing solely on the Gini Index can thus obscure perception of important market income trends or changes in the redistributive impact of the tax and transfer system. Hence, analysts should supplement the use of an aggregate summary index of inequality with direct examination of the segments of the income distribution which they think are of greatest importance. Keywords: Inequality; Gini; Social Welfare; Redistributive Effort (search for similar items in EconPapers) Published in Review of Income and Wealth, September 2017, pages 574-584 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:dal:wpaper:daleconwp2016-01 Access Statistics for this paper More papers in Working Papers from Dalhousie University, Department of Economics Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.