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


  • Alex Cobham

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

  • Andrew Sumner

    () (King's College London)


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.

Suggested Citation

  • Alex Cobham & Andrew Sumner, 2013. "Is it all about the tails? The Palma measure of income inequality," Working Papers 308, ECINEQ, Society for the Study of Economic Inequality.
  • Handle: RePEc:inq:inqwps:ecineq2013-308

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    References listed on IDEAS

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    4. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2011. "Top Incomes in the Long Run of History," Journal of Economic Literature, American Economic Association, vol. 49(1), pages 3-71, March.
    5. Shorrocks, Anthony & Wan, Guanghua, 2008. "Ungrouping Income Distributions: Synthesising Samples for Inequality and Poverty Analysis," WIDER Working Paper Series 016, World Institute for Development Economic Research (UNU-WIDER).
    6. Cornia, Giovanni Andrea & Addison, Tony & Kiiski, Sampsa, 2003. "Income Distribution Changes and their Impact in the Post-World War II Period," WIDER Working Paper Series 028, World Institute for Development Economic Research (UNU-WIDER).
    7. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198281931, June.
    8. 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.
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    Cited by:

    1. José Gabriel Palma, 2016. "Do nations just get the inequality they deserve? The ‘Palma Ratio’ re-examined," Cambridge Working Papers in Economics 1627, Faculty of Economics, University of Cambridge.
    2. Janský & Kalíšková & Münich, 2016. "Does the Czech Tax and Benefit System Contribute to One of Europe’s Lowest Levels of Relative Income Poverty and Inequality?," Eastern European Economics, Taylor & Francis Journals, vol. 54(3), pages 191-207, May.
    3. Channing Arndt & Sam Jones & Vincenzo Salvucci, 2015. "When do relative prices matter for measuring income inequality? The case of food prices in Mozambique," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(3), pages 449-464, September.
    4. Asian Development Bank (ADB) & Asian Development Bank (ADB) & Asian Development Bank (ADB) & Asian Development Bank (ADB), 2014. "Cambodia: Country Poverty Analysis 2014," ADB Reports RPT146839, Asian Development Bank (ADB).
    5. repec:wsi:jicepx:v:06:y:2015:i:03:n:s1793993315500167 is not listed on IDEAS
    6. Alice Krozer, 2017. "The Inequality We Want: How Much Is Too Much?," LIS Working papers 690, LIS Cross-National Data Center in Luxembourg.
    7. Nancy Birdsall & Christian J. Meyer, 2015. "The Median is the Message: A Good Enough Measure of Material Wellbeing and Shared Development Progress," Global Policy, London School of Economics and Political Science, vol. 6(4), pages 343-357, November.
    8. Antonio Villar, 2015. "Crisis, households’ expenditure and family structure," Working Papers 1522, BBVA Bank, Economic Research Department.
    9. Krozer Alice, 2015. "The Inequality We Want: How Much is too Much?," WIDER Working Paper Series 015, World Institute for Development Economic Research (UNU-WIDER).
    10. repec:bpj:globdv:v:7:y:2016:i:2:p:18:n:2 is not listed on IDEAS
    11. Alex Cobham & Luke Schlogl & Andy Sumner, 2015. "Inequality and the Tails: The Palma Proposition and Ratio Revisited," Working Papers 143, United Nations, Department of Economics and Social Affairs.
    12. repec:mes:eaeuec:v:54:y:2016:i:3:p:191-207 is not listed on IDEAS
    13. Greselin, Francesca & Zitikis, Ricardas, 2015. "Measuring economic inequality and risk: a unifying approach based on personal gambles, societal preferences and references," MPRA Paper 65892, University Library of Munich, Germany.
    14. repec:gam:jecnmx:v:6:y:2018:i:1:p:4-:d:128699 is not listed on IDEAS
    15. Syed Mansoob Murshed & Muhammad Badiuzzaman & Mohammad Habibullah Pulok, 2017. "Fiscal capacity and social protection expenditure in developing nations," WIDER Working Paper Series 060, World Institute for Development Economic Research (UNU-WIDER).
    16. 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.
    17. Paddy Carter & Alex Cobham, 2016. "Are taxes good for your health?," WIDER Working Paper Series 171, World Institute for Development Economic Research (UNU-WIDER).

    More about this item


    Inequality; Gini coefficient; Palma.;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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