The Small Sample Bias of the Gini Coefficient: Results and Implications for Empirical Research

University of Illinois Working Paper No. 00-0103

22 Pages Posted: 22 Jun 2000

See all articles by George Deltas

George Deltas

University of Illinois at Urbana-Champaign - Department of Economics

Date Written: January 2000

Abstract

The Gini coefficient is a downwardly biased measure of inequality in small populations when income is generated by one of three common distributions. The paper discusses the sources of bias and argues that this property is far more general. This has implications for (i) the comparison of inequality among sub-samples, some of which may be small, and (ii) the use of the Gini in measuring firm size inequality in markets with a small number of firms. The small sample bias has often lead to mis-perceptions about trends in industry concentration. A small sample adjustment results in a reduced bias which can no longer be signed as positive or negative. Finally, an empirical example illustrates the importance of using the adjusted Gini. In this example it is shown that, controlling for market characteristics, larger shipping cartels include a stochastically identical (in terms of relative size) set of firms as smaller shipping cartels.

JEL Classification: C19, L11, O14

Suggested Citation

Deltas, George, The Small Sample Bias of the Gini Coefficient: Results and Implications for Empirical Research (January 2000). University of Illinois Working Paper No. 00-0103, Available at SSRN: https://ssrn.com/abstract=224896 or http://dx.doi.org/10.2139/ssrn.224896

George Deltas (Contact Author)

University of Illinois at Urbana-Champaign - Department of Economics ( email )

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