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Measuring Income Inequality: An Application Of The Population Dynamic Theil'S Entropy

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  • Guglielmo D’Amico
  • Giuseppe Di Biase
  • Raimondo Manca

Abstract

In this paper we use the index we call Population Dynamic Theil's Entropy to analyze as the income inequality varies on time. The index may consider both the inequality among the classes in which we assign the individuals and the inequality within each class. This inequality measure working in a dynamic way allows to forecast inequality in time. Besides it may capture not only changes in the wealth but also changes in the population composition. The earned results are relevant for adopting a social and economic policy of wealth distribution. We fulfilled the model with statistics from the Organization for Economic Cooperation and Development and we applied it to Mexico, Portugal and Spain. We picked up economic data about population, means and medians of the equivalised net income for the three countries. The data refer to years from 2004 to 2011.

Suggested Citation

  • Guglielmo D’Amico & Giuseppe Di Biase & Raimondo Manca, 2015. "Measuring Income Inequality: An Application Of The Population Dynamic Theil'S Entropy," Accounting & Taxation, The Institute for Business and Finance Research, vol. 7(1), pages 103-114.
    • Handle: RePEc:ibf:acttax:v:7:y:2015:i:1:p:103-114
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    References listed on IDEAS

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    More about this item

    Keywords

    Income Distribution; Population Dynamic Theil's Entropy; Markov Chains;
    All these keywords.

    JEL classification:

    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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