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Inequality and the tails: The Palma proposition and ratio revised

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  • Alex Cobham

    (King’s College, London, U.K.)

  • Luke Schlogl

    (King’s College, London, U.K.)

  • Andy Sumner

    () (King’s College, London, U.K.)

Abstract

This paper revisits the earlier assessments of the Palma Proposition and the ‘Palma Ratio’. The former is a proposition that currently changes in income or consumption inequality are (almost) exclusively due to changes in the share of the richest 10 per cent and poorest 40 per cent because the ‘middle’ group between the richest and poorest always capture approximately 50 per cent of gross national income (GNI). The latter is a measure of income or consumption concentration based on the above-mentioned proposition and calculated as the GNI capture of the richest 10 per cent divided by that of the poorest 40 per cent. In this paper we do the following: note the use already being made of the Palma Ratio; consider the issue of hidden (or partially hidden) inequality and how the Palma may be useful in bringing this to light in the parts of the distribution that we are likely to be more interested in (the richest and the poorest); revisit the empirical basis of the Palma Proposition (the relative stability of the ‘middle’) with a new and expanded dataset across and within developing and developed countries. We find the data reaffirms the Palma Proposition and that the proposition is getting stronger over time. We also discuss the theoretical and empirical questions and implications arising from the Palma Proposition as areas for future exploration.

Suggested Citation

  • Alex Cobham & Luke Schlogl & Andy Sumner, 2015. "Inequality and the tails: The Palma proposition and ratio revised," Working Papers 366, ECINEQ, Society for the Study of Economic Inequality.
  • Handle: RePEc:inq:inqwps:ecineq2015-366
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    References listed on IDEAS

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    Cited by:

    1. Vanessa Simen Tchamyou, 2020. "Education, lifelong learning, inequality and financial access: evidence from African countries," Contemporary Social Science, Taylor & Francis Journals, vol. 15(1), pages 7-25, January.
    2. I. Josa & A. Aguado, 2020. "Measuring Unidimensional Inequality: Practical Framework for the Choice of an Appropriate Measure," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 149(2), pages 541-570, June.
    3. Meniago, Christelle & Asongu, Simplice A., 2018. "Revisiting the finance-inequality nexus in a panel of African countries," Research in International Business and Finance, Elsevier, vol. 46(C), pages 399-419.
    4. Simplice Asongu & Nicholas Odhiambo, 2019. "Inequality and the economic participation of women in sub-Saharan Africa: An empirical investigation," African Journal of Economic and Management Studies, Emerald Group Publishing, vol. 11(2), pages 193-206, June.
    5. Tchamyou, Vanessa S. & Erreygers, Guido & Cassimon, Danny, 2019. "Inequality, ICT and financial access in Africa," Technological Forecasting and Social Change, Elsevier, vol. 139(C), pages 169-184.
    6. 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.
    7. Vanessa S. Tchamyou, 2019. "The Role of Information Sharing in Modulating the Effect of Financial Access on Inequality," Journal of African Business, Taylor & Francis Journals, vol. 20(3), pages 317-338, July.
    8. Emine TAHSİN, 2019. "An Investigation of the Palma Ratio for Turkey Both on National and Regional Level," Sosyoekonomi Journal, Sosyoekonomi Society, issue 27(41).
    9. Germà Bel & Jordi J. Teixidó, 2019. "“The Political Economy of the Paris Agreement. Income Inequality and Climate Policy”," IREA Working Papers 201915, University of Barcelona, Research Institute of Applied Economics, revised Sep 2019.
    10. Andy Sumner, 2016. "The world's two new middles Growth, precarity, structural change, and the limitations of the special case," WIDER Working Paper Series 034, World Institute for Development Economic Research (UNU-WIDER).
    11. Tahsin, Emine, 2019. "Concentration of income inequality on the basis of Palma ratio and income deciles of Turkey on national and regional level," MPRA Paper 92490, University Library of Munich, Germany.
    12. Dorothee Rodenhäuser & Benjamin Held & Hans Diefenbacher, 2019. "Der Nationale Wohlfahrtsindex," IMK Studies 64-2019, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

    More about this item

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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