27
Mar
2018
Inequality Measures and the Median: Why inequality increased more than we thought
with Frank Cowell (London School of Economics)
02:00 pm
04:00 pm
For inquiries:
seminars@liser.lu

Abstract

Abstract: Many standard inequality measures can be written as ratios with the mean in the denominator. When one income moves away from equality, both the numerator and the denominator may vary in the same direction and such indices may decrease. This anomalous behaviour is not shared by median-normalised inequality measures developed in this paper, where the mean at the denominator is replaced by the median. However, median-normalised inequality measures do not respect the principle of transfers. We show that the absolute Gini and the mean logarithmic deviation, or second Theil, index are the only measures that both avoid anomalous behaviour when one income is varied and also satisfy the principle of transfers. An application shows that the increase of inequality in the United Sates over the last decades is largely underestimated with the Gini index and, that the mean logarithmic deviation index should be preferred in practice.

Note: Lunch will be served during presentation

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