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Measuring income inequalities beyond the Gini coefficient
[journal article]
Abstract Growing interest in the analysis of interrelationships between income distribution and economic growth has recently stimulated new theoretical and empirical research. Measures such as the head-count ratio for the poverty index or the widely used Gini coefficient are aggregated indicators describing ... view more
Growing interest in the analysis of interrelationships between income distribution and economic growth has recently stimulated new theoretical and empirical research. Measures such as the head-count ratio for the poverty index or the widely used Gini coefficient are aggregated indicators describing the general extent of inequality without deeper insights into income distribution among households. To derive an indicator accounting for income distribution among income groups, we propose a new approach based on an output oriented DEA model where the input value is unitized to 1 for each country and weights restrictions imposed so as to favour a higher income share in the lower quantiles. We demonstrate the merits of this approach on the quintile income breakdown data of 29 European countries. Prioritizing lower income groups’ welfare, countries such as Slovenia and Slovakia can be equally favoured by the new proposed indicator while being assessed differently by the Gini index. An intertemporal analysis reveals a slight deterioration of income distribution in the majority of 29 European countries over the period of 2007–2016 in a Rawlsian sense.... view less
Keywords
income distribution; difference in income; inequality; social inequality; measurement; index; Europe
Classification
Methods and Techniques of Data Collection and Data Analysis, Statistical Methods, Computer Methods
Income Policy, Property Policy, Wage Policy
Free Keywords
Rawlsian utility; Data envelopment analysis; Weights restriction; Malmquist index; EU-SILC
Document language
English
Publication Year
2020
Page/Pages
p. 561-578
Journal
Central European Journal of Operations Research, 28 (2020) 2
Issue topic
Special Issue: Dynamic Optimization in Management and Economics & Human factors in a contemporary organization
DOI
https://doi.org/10.1007/s10100-019-00662-9
ISSN
1613-9178
Status
Published Version; peer reviewed