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Do Nations Just Get the Inequality They Deserve? The “Palma Ratio” Re-examined

In: Inequality and Growth: Patterns and Policy

Author

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  • José Gabriel Palma

    (Cambridge University)

  • Joseph E. Stiglitz

    (Columbia University)

Abstract

The main aim of this paper is to take another look at differences in within-nation income distribution in the current era of neoliberal globalisation. The emphasis will be on the study of middle-income countries with high degrees of inequality, especially those that have implemented full-blown economic reforms, such as those in Latin America and Southern Africa. I first examine statistically how unequal is inequality across the world in terms of overall inequality as well as of different groups within each country; then, I analyse why there is so much diversity in terms of distributional outcomes across the world. In doing so it would become apparent why the Gini has already served its purpose as a practical index of income distribution (i.e., how it has passed its sell-by date) and why a new index that I proposed in Palma (2011) — which was later christened the “Palma Ratio” by Alex Cobham and Andy Sumner2 — could be more appropriate to understand issues such as those mentioned above.

Suggested Citation

  • José Gabriel Palma & Joseph E. Stiglitz, 2016. "Do Nations Just Get the Inequality They Deserve? The “Palma Ratio” Re-examined," International Economic Association Series, in: Kaushik Basu & Joseph E. Stiglitz (ed.), Inequality and Growth: Patterns and Policy, chapter 2, pages 35-97, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-1-137-55459-8_2
    DOI: 10.1057/9781137554598_2
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    2. Palma, José Gabriel, 2018. "Por qué la economía ortodoxa transfirió su obsesión por un concepto (mercado) a la de un ritual (matemáticas)," Estudios Nueva Economía, Estudios Nueva Economía, vol. 5(1), pages 7-20.
    3. Daniel Oviedo & Luis A. Guzman, 2020. "Revisiting Accessibility in a Context of Sustainable Transport: Capabilities and Inequalities in Bogotá," Sustainability, MDPI, vol. 12(11), pages 1-22, June.
    4. ANA CECILIA PARADA ROJAS & Humberto Ríos Bolívar & JORGE OMAR RAZO DE ANDA, 2019. "Mining Of Classification Trees To Analyze A Multidimensional Phenomenon," Proceedings of International Academic Conferences 9010809, International Institute of Social and Economic Sciences.
    5. Guzman, Luis A. & Oviedo, Daniel, 2018. "Accessibility, affordability and equity: Assessing ‘pro-poor’ public transport subsidies in Bogotá," Transport Policy, Elsevier, vol. 68(C), pages 37-51.
    6. Diego Martínez-Navarro & Ignacio Amate-Fortes & Almudena Guarnido-Rueda, 2020. "Inequality and development: is the Kuznets curve in effect today?," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 37(3), pages 703-735, October.
    7. José Gabriel Palma, 2016. "Why are developing country corporations more susceptible to the vicissitudes of international finance?," The Economic and Labour Relations Review, , vol. 27(3), pages 281-292, September.
    8. Claudia Suárez‐Arbesú & Nicholas Apergis & Francisco J. Delgado, 2023. "Club convergence and factors of income inequality in the European Union," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 3654-3666, October.
    9. ANA CECILIA PARADA ROJAS & Humberto Ríos Bolívar & Jorge Omar Razo De Anda, 2019. "Mining Of Classification Trees To Analyze A Multidimensional Phenomenon," Proceedings of International Academic Conferences 9110842, International Institute of Social and Economic Sciences.
    10. Ahmet Faruk Aysan & Dilek Demirbas & Mustafa Disli & Monica Parra, 2021. "Resilience and Path Dependency: Income Distribution Effects of GDP in Colombia," Working Papers hal-03365148, HAL.
    11. Zhu, Le & Shi, Fei, 2022. "Spatial and social inequalities of job accessibility in Kunshan city, China: Application of the Amap API and mobile phone signaling data," Journal of Transport Geography, Elsevier, vol. 104(C).

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    More about this item

    Keywords

    Nash Equilibrium; Income Inequality; Income Distribution; National Income; Income Share;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • N16 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Latin America; Caribbean
    • N30 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - General, International, or Comparative
    • N36 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Latin America; Caribbean

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