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.
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- Banks, James & Johnson, Paul, 1994. "Equivalence Scale Relativities Revisited," Economic Journal, Royal Economic Society, vol. 104(425), pages 883-90, July.
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