Top Incomes and Income Inequality Indices: A Unified Framework Based on Inequality Index Curves

53 Pages Posted: 8 Aug 2017 Last revised: 28 Sep 2019

See all articles by Min Dai

Min Dai

National University of Singapore (NUS) - Department of Mathematics

Steven Kou

Boston University

Hui Shao

National University of Singapore (NUS) - Risk Management Institute

Date Written: August 5, 2017

Abstract

An income inequality index number, which assigns a single numerical value to the income distribution, cannot summarize the complete information in the distribution. We propose a family of inequality index curves, which includes curves generated by popular inequality index numbers (e.g. the top income shares, the Gini coefficient, the single parameter Gini coefficient, the Palma ratio, and the Hoover index). The family has two advantages: (1) The family has an axiomatic foundation based on the weighted expected utility theory. (2) Each curve in the family contains the full information of the income distribution. Complementing the previous empirical studies based on the top income shares, we use the family of inequality index curves and micro level data to show that the bottom and middle income people in the U.S. became more equally relatively poor (not just relatively poorer) from 1990 to 2010.

Keywords: income inequality, top incomes, Gini coefficient, weighted expected utility theory

Suggested Citation

Dai, Min and Kou, Steven and Shao, Hui, Top Incomes and Income Inequality Indices: A Unified Framework Based on Inequality Index Curves (August 5, 2017). Available at SSRN: https://ssrn.com/abstract=3014513 or http://dx.doi.org/10.2139/ssrn.3014513

Min Dai

National University of Singapore (NUS) - Department of Mathematics ( email )

Singapore

Steven Kou

Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States
6173583318 (Phone)

Hui Shao (Contact Author)

National University of Singapore (NUS) - Risk Management Institute ( email )

21 Heng Mui Keng Terrace
Level 4
Singapore, 119613
Singapore

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