Inequality measurement for bounded variables

Inaki Permanyer, Suman Seth and Gaston Yalonetzky
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Inaki Permanyer: ICREA Centre d'Estudis Demogrà fics
Suman Seth: University of Leeds

No 602, Working Papers from ECINEQ, Society for the Study of Economic Inequality

Abstract: Numerous non-pecuniary variables of interest for inequality assessment are bounded and often represented in terms of attainments or shortfalls. Inequality measurement for bounded variables suffers from two key challenges: the consistency problem and the boundary problem. The former occurs when inequality rankings reverse while switching between attainment and shortfall representations. The latter stems from the existence of a predictable functional relationship between mean attainment and maximum feasible inequality hindering inequality comparisons across distributions with different means. Unlike consistency, the boundary problem has not received significant attention in the literature. We propose two novel classes of normalized inequality measures that are immune to both problems. We illustrate the empirical relevance ofour approach with cross-country comparisons of inequality in well-established indicators of education and health. A starkly different picture emerges when traditional inequality indices give way to our normalized inequality indices.

Keywords: Inequality measurement; bounded variables; boundary problem; consistency; Kuznets curves. (search for similar items in EconPapers)
JEL-codes: D63 I31 O57 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2022-02
New Economics Papers: this item is included in nep-his
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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