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

Author

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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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    Cited by:

    1. Aboozar Hadavand, 2017. "Misperceptions and mismeasurements: An analysis of subjective economic inequality," Working Papers 449, ECINEQ, Society for the Study of Economic Inequality.
    2. Knell, Markus & Stix, Helmut, 2016. "Perceptions of Inequality," Annual Conference 2016 (Augsburg): Demographic Change 145718, Verein für Socialpolitik / German Economic Association.
    3. 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.
    4. 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 Applied Economics.
    5. 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.
    6. Jeffrey Zax, 2014. "Housing allocations, imputed rents and inequality in urban China," ERSA conference papers ersa14p1682, European Regional Science Association.
    7. 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.
    8. Gimpelson, Vladimir & Treisman, Daniel, 2015. "Misperceiving Inequality," IZA Discussion Papers 9100, Institute for the Study of Labor (IZA).

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