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The inequality of extreme incomes

Author

Listed:
  • Lidia Ceriani

    (Georgetown University, USA)

  • Paolo Verme

    (The World Bank, USA)

Abstract

The paper derives the conditions under which income inequality measured with the Gini index is expected to increase or decrease if missing observations are added at the top or/and at the bottom of an income distribution. It shows that adding observations on the extremes of the income distribution does not necessarily result in an increase in inequality, but that meeting the conditions for obtaining a decrease in inequality is unlikely. It also shows that adding observations at the top weighs more on inequality than adding observations at the bottom. These findings are confirmed by an application to US states data. Adding observations on the extremes of an income distribution should be normally expected to increase inequality and recovering missing observations at the top should be prioritized.

Suggested Citation

  • Lidia Ceriani & Paolo Verme, 2019. "The inequality of extreme incomes," Working Papers 490, ECINEQ, Society for the Study of Economic Inequality.
    • Handle: RePEc:inq:inqwps:ecineq2019-490
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    File URL: http://www.ecineq.org/milano/WP/ECINEQ2019-490.pdf
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    References listed on IDEAS

    as
    1. Vladimir Hlasny & Paolo Verme, 2018. "Top Incomes and the Measurement of Inequality in Egypt," The World Bank Economic Review, World Bank, vol. 32(2), pages 428-455.
    2. 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.
    3. Verme, Paolo & Schuettler, Kirsten, 2021. "The impact of forced displacement on host communities: A review of the empirical literature in economics," Journal of Development Economics, Elsevier, vol. 150(C).
    4. Lidia Ceriani & Paolo Verme, 2012. "The origins of the Gini index: extracts from Variabilità e Mutabilità (1912) by Corrado Gini," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 10(3), pages 421-443, September.
    5. Vladimir Hlasny & Paolo Verme, 2022. "The Impact of Top Incomes Biases on the Measurement of Inequality in the United States," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 84(4), pages 749-788, August.
    6. Vladimir Hlasny & Paolo Verme, 2018. "Top Incomes and Inequality Measurement: A Comparative Analysis of Correction Methods Using the EU SILC Data," Econometrics, MDPI, vol. 6(2), pages 1-21, June.
    7. Paolo Verme & Chiara Gigliarano & Christina Wieser & Kerren Hedlund & Marc Petzoldt & Marco Santacroce, 2016. "The Welfare of Syrian Refugees," World Bank Publications - Books, The World Bank Group, number 23228, December.
    8. Cowell, Frank A. & Victoria-Feser, Maria-Pia, 1996. "Poverty measurement with contaminated data: A robust approach," European Economic Review, Elsevier, vol. 40(9), pages 1761-1771, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Vladimir Hlasny & Lidia Ceriani & Paolo Verme, 2022. "Bottom Incomes and the Measurement of Poverty and Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 68(4), pages 970-1006, December.
    2. Brian A'Hearn & Stefano Chianese & Giovanni Vecchi, 2020. "Aristocracy and Inequality in Italy, 1861-1931," HHB Working Papers Series 18, The Historical Household Budgets Project.
    3. Pablo Gutiérrez Cubillos, 2022. "Gini and undercoverage at the upper tail: a simple approximation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(2), pages 443-471, April.

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    More about this item

    Keywords

    Income inequality; income distributions; migration; top incomes; bottom incomes.;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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