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Is it all about the tails? The Palma measure of income inequality

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  • Alex Cobham

    ()
    (Centre for Global Development (CGD), Washington, DC)

  • Andrew Sumner

    ()
    (King's College London)

Abstract

The ``Palma'' is the ratio of national income shares of the top 10 percent of households to the bottom 40 percent, reflecting Gabriel Palma's observation of the stability of the ``middle'' 50 percent share of income across countries so that distribution is largely a question of the tails. In this paper we explore the Palma and corroborate the findings that the middle does indeed hold over time and through various stages of tax and transfers. Further, we find that the Gini is almost completely ``explained'' by only two points of the distribution: the same income shares which determine the Palma. It thus appears that both the Gini and the Palma, in practice, summarize the same information about the income distribution: but only in the case of the Palma is this explicit. This, we argue, makes the Palma a more useful (and intuitive) measure of inequality for policymakers and citizens to track.

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File URL: http://www.ecineq.org/milano/WP/ECINEQ2013-308.pdf
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Bibliographic Info

Paper provided by ECINEQ, Society for the Study of Economic Inequality in its series Working Papers with number 308.

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Length: 45 pages
Date of creation: Oct 2013
Date of revision:
Handle: RePEc:inq:inqwps:ecineq2013-308

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Keywords: Inequality; Gini coefficient; Palma.;

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References

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  1. Benito Frosini, 2012. "Approximation and decomposition of Gini, Pietra–Ricci and Theil inequality measures," Empirical Economics, Springer, vol. 43(1), pages 175-197, August.
  2. Augustin Kwasi Fosu, 2011. "Growth, Inequality, and Poverty Reduction in Developing Countries: Recent Global Evidence," Working Paper Series UNU-WIDER Working Paper W, World Institute for Development Economic Research (UNU-WIDER).
  3. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2009. "Top Incomes in the Long Run of History," NBER Working Papers 15408, National Bureau of Economic Research, Inc.
  4. Palma, J.G., 2011. "Homogeneous middles vs. heterogeneous tails, and the end of the ‘Inverted-U’: the share of the rich is what it's all about," Cambridge Working Papers in Economics 1111, Faculty of Economics, University of Cambridge.
  5. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198281931.
  6. Shorrocks, Anthony & Wan, Guanghua, 2008. "Ungrouping Income Distributions: Synthesising Samples for Inequality and Poverty Analysis," Working Paper Series RP2008/16, World Institute for Development Economic Research (UNU-WIDER).
  7. Villasenor, JoseA. & Arnold, Barry C., 1989. "Elliptical Lorenz curves," Journal of Econometrics, Elsevier, vol. 40(2), pages 327-338, February.
  8. Cornia, Giovanni Andrea & Addison, Tony & Kiiski, Sampsa, 2003. "Income Distribution Changes and their Impact in the Post-World War II Period," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  9. Francesca Greselin & Leo Pasquazzi & Ričardas Zitikis, 2013. "Contrasting the Gini and Zenga indices of economic inequality," Journal of Applied Statistics, Taylor & Francis Journals, vol. 40(2), pages 282-297, February.
  10. Juan Antonio Duro, 2008. "Cross-country inequalities in welfare and its decomposition by Sen factors: the virtues of the Theil index," Applied Economics Letters, Taylor & Francis Journals, vol. 15(13), pages 1041-1045.
  11. José Gabriel Palma, 2006. "Globalizing Inequality: ‘Centrifugal’ and ‘Centripetal’ Forces at Work," Working Papers 35, United Nations, Department of Economics and Social Affairs.
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Cited by:
  1. Salvatore Morelli & Timothy Smeeding & Jeffrey Thompson, 2014. "Post-1970 Trends in Within-Country Inequality and Poverty: Rich and Middle Income Countries," CSEF Working Papers 356, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  2. Nancy Birdsall and Christian J. Meyer, 2014. "The Median Is the Message: A Good-Enough Measure of Material Well-Being and Shared Development Progress," Working Papers 351, Center for Global Development.

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