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Choosing Measures of Inequality for Empirical Applications

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Abstract

This paper is concerned with the distribution of income and the problem of choosing summary measures of inequality for empirical applications. By introducing a simple transformation of the Lorenz curve one is led to three measures of inequality, which jointly prove to represent a fairly good approximation of the inequality in a distribution function and also yield essential information about the shape of the income distribution. The paper also demonstrates that this type of inequality measures have an explicit normative foundation as well as an attractive statistical/geometrical interpretation. Furthermore, it is shown that the measures' sensitivity to transfers depend on the shape of the income distribution.

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File URL: http://www.ssb.no/a/publikasjoner/pdf/DP/dp_158.pdf
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Bibliographic Info

Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 158.

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Date of creation: Nov 1995
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Handle: RePEc:ssb:dispap:158

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Keywords: Measures of inequality; statistical and normative characterization of inequality.;

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Cited by:
  1. Rolf Aaberge & Ugo Colombino, 1998. "Social Evaluation of Individual Welfare Effects from Income Taxation Empirical Evidence Based on Italian Data for Married Couples," Discussion Papers 230, Research Department of Statistics Norway.
  2. John K. Dagsvik & Bjørn H. Vatne, 1999. "Is the Distribution of Income Compatible with a Stable Distribution?," Discussion Papers 246, Research Department of Statistics Norway.
  3. Sverre Grepperud, 1997. "Soil Depletion Choices under Production and Price Uncertainty," Discussion Papers 186, Research Department of Statistics Norway.

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