Interpreting Inequality Measures and Changes in Inequality

John Creedy

No 14/20, Treasury Working Paper Series from New Zealand Treasury

Abstract: This paper explores, in the context of the Atkinson inequality measure, attempts to make interpretations of orders of magnitude transparent. One suggestion is that the analogy of sharing a cake among a very small number of people provides a useful intuitive description for people who want some idea of what an inequality measure ‘actually means’. In contrast with the Gini measure, for which a simple ‘cake-sharing’ result is available, the Atkinson measure requires a nonlinear equation to be solved. Comparisons of ‘excess shares’ (the share obtained by the richer person in excess of the arithmetic mean) for a range of assumptions are provided. The implications for the ‘leaky bucket’ experiments are also examined. An additional approach is to obtain the ‘pivotal income’, above which a small increase for any individual increases inequality. The properties of this measure for the Atkinson index are also explored.

Keywords: Inequality; Atkinson Measure; Excess Share (search for similar items in EconPapers)
JEL-codes: D31 D63 (search for similar items in EconPapers)
Pages: 24
Date: 2014-11
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https://treasury.govt.nz/sites/default/files/2014-11/wp-14-20.pdf (application/pdf)

Related works:
Journal Article: Interpreting inequality measures and changes in inequality (2016)
Working Paper: Interpreting Inequality Measures and Changes in Inequality (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:nzt:nztwps:14/20

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