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A Simple Correction to Remove the Bias of the Gini Coefficient due to Grouping

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  • Tom Van Ourti

    (Erasmus University Rotterdam, Tinbergen Institute, NETSPAR)

  • Philip Clarke

    (University of Sydney, Australian National University)

Abstract

We propose a first-order bias correction term for the Gini index to reduce the bias due to grouping. It depends on only the number of individuals in each group and is derived from a measurement error framework. We also provide a formula for the remaining second-order bias. Both Monte Carlo and EU and U.S. empirical evidence show that the first-order correction reduces a considerable share of the bias, but that some remaining second-order bias is increasing in the variance. We propose a procedure that addresses the remaining second-order bias by using additional information. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Tom Van Ourti & Philip Clarke, 2011. "A Simple Correction to Remove the Bias of the Gini Coefficient due to Grouping," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 982-994, August.
    • Handle: RePEc:tpr:restat:v:93:y:2011:i:3:p:982-994
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    Citations

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    Cited by:

    1. Knell, Markus & Stix, Helmut, 2020. "Perceptions of inequality," European Journal of Political Economy, Elsevier, vol. 65(C).
    2. Clarke, Philip & Van Ourti, Tom, 2010. "Calculating the concentration index when income is grouped," Journal of Health Economics, Elsevier, vol. 29(1), pages 151-157, January.
    3. Erreygers, Guido & Clarke, Philip & Van Ourti, Tom, 2012. "“Mirror, mirror, on the wall, who in this land is fairest of all?”—Distributional sensitivity in the measurement of socioeconomic inequality of health," Journal of Health Economics, Elsevier, vol. 31(1), pages 257-270.
    4. Branko Milanovic, 2012. "Global inequality recalculated and updated: the effect of new PPP estimates on global inequality and 2005 estimates," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 10(1), pages 1-18, March.
    5. von Fintel, Dieter & Links, Calumet & Green, Erik, 2023. "Estimating Historical Inequality from Social Tables: Towards Methodological Consistency," Lund Papers in Economic History 247, Lund University, Department of Economic History.
    6. Vladimir Gimpelson & Daniel Treisman, 2018. "Misperceiving inequality," Economics and Politics, Wiley Blackwell, vol. 30(1), pages 27-54, March.
    7. Knell, Markus & Stix, Helmut, 2020. "Perceptions of inequality," European Journal of Political Economy, Elsevier, vol. 65(C).
    8. Silvia De Nicol`o & Maria Rosaria Ferrante & Silvia Pacei, 2021. "Mind the Income Gap: Bias Correction of Inequality Estimators in Small-Sized Samples," Papers 2107.08950, arXiv.org, revised May 2023.
    9. Matthijs J. Warrens, 2018. "On the Negative Bias of the Gini Coefficient due to Grouping," Journal of Classification, Springer;The Classification Society, vol. 35(3), pages 580-586, October.
    10. Amlan Majumder & Takayoshi Kusago, 2018. "A note on the use of decile or quintile group-share of income or consumption from the popular income inequality databases to explain inequality conditions," Economics Bulletin, AccessEcon, vol. 38(4), pages 2152-2166.
    11. Aboozar Hadavand, 2017. "Misperceptions and mismeasurements: An analysis of subjective economic inequality," Working Papers 449, ECINEQ, Society for the Study of Economic Inequality.
    12. Tatjana Miljkovic & Ying-Ju Chen, 2021. "A new computational approach for estimation of the Gini index based on grouped data," Computational Statistics, Springer, vol. 36(3), pages 2289-2311, September.
    13. Amlan Majumder & Takayoshi Kusago, 2021. "A consistency check of the World Income Inequality Database in favour of common readers," SN Business & Economics, Springer, vol. 1(7), pages 1-17, July.
    14. ERREYGERS, Guido & CLARKE, Philip & VAN OURTI, Tom, 2010. "Mirror, mirror, on the wall, who in this land is fairest of all? Revisiting the extended concentration index," Working Papers 2010015, University of Antwerp, Faculty of Business and Economics.
    15. Jeffrey Zax, 2014. "Housing allocations, imputed rents and inequality in urban China," ERSA conference papers ersa14p1682, European Regional Science Association.
    16. Rubolino, Enrico, 2019. "The efficiency and distributive effects of local taxes: evidence from Italian municipalities," ISER Working Paper Series 2019-02, Institute for Social and Economic Research.
    17. Sabiou Inoua, 2021. "Beware the Gini Index! A New Inequality Measure," Papers 2110.01741, arXiv.org.

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