Inequality and the Time-Structure of Household Income in Israel

Abstract

The aim of this paper is to empirically evaluate the effect of the length of the accounting period on indices of inequality of household income in Israel. There are three main findings: (1) The analysis of the impact of the account period on the Gini index of inequality can be done in a way which is identical to analyzing the effect of the accounting period on the coefficient of variation; (2) Changing the accounting period from one month to three months decreases, on average, the Gini index of inequality by about 1.7%. Furthermore, the Gini index calculated from a three-month accounting period was 3.9-4.1% higher than the index based on a twelve-month period. The change in the accounting period from twelve months to three months accounts for 27 to 37 percent of the increase in inequality in the last two decades, depending on the type of income considered. (3) The above relationship is stable over the years but is sensitive to the definition of income.

Keywords: decomposition, Gini correlation, inequality, time

JEL Classification: C10, J6, O15