The Relationship between the Equivalence Scale and the Inequality Index and Its Impact on the Measurement of Income Inequality
The paper discusses the ∪-shaped relationship between the equivalence scale n^ε and the Gini index instead of considering the equivalence scale’s relationship to the generalised entropy measures, which was studied by Coulter, et al. (1992). An end-point condition is given for the ∪-shaped relationship, which corresponds to a condition for that of the generalised entropy measures. Additionally, using a mixture of log-normal distributions approach, five factors are shown to be required for a convex relationship between size elasticity and the Gini index. Empirically, income distributions satisfy those factors. Thus, the end-point condition essentially determines the shape of the relationship.
|Date of creation:||12 Mar 2012|
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- Phipps, Shelley & Garner, Thesia I, 1994.
"Are Equivalence Scales the Same for the United States and Canada?,"
Review of Income and Wealth,
International Association for Research in Income and Wealth, vol. 40(1), pages 1-17, March.
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- Masato Okamoto, 2009. "Decomposition of gini and multivariate gini indices," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 7(2), pages 153-177, June.
- Banks, James & Johnson, Paul, 1994. "Equivalence Scale Relativities Revisited," Economic Journal, Royal Economic Society, vol. 104(425), pages 883-890, July.
- Blundell, Richard & Ray, Ranjan, 1982. "A non-separable generalisation of the linear expenditure system allowing non-linear Engel curves," Economics Letters, Elsevier, vol. 9(4), pages 349-354.
- Yitzhaki, Shlomo & Lerman, Robert I, 1991. "Income Stratification and Income Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 37(3), pages 313-329, September.
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