The Gini Coefficient Reveals More

26 Pages Posted: 29 Sep 2005

See all articles by Peter J. Lambert

Peter J. Lambert

University of Oregon - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

André Decoster

Department of Economics KU Leuven

Date Written: February 2005

Abstract

We revisit the well-known decomposition of the Gini coefficient into betweengroups, within-groups and overlap terms in the context of two groups in which the incomes in one group may be scaled and that group's population weight modified. In this more general setting than usual, we focus on the properties of the overlap term, proving inter alia that overlap unambiguously reduces as a result of a within-group progressive transfer, and is increased by scaling up the incomes in the group with the lower mean, reaching a maximum when the two means become the same. In the case of a socially heterogeneous population and equivalized incomes, the effect on the Gini overlap of changing the income unit is determined, along with that of adjusting the equivalence scale deflator in case the income unit is the equivalent adult (such adjustment simultaneously changing the weighting of income units).

Keywords: Gini Coefficient, Inequality Decomposition, Gini Residuel

JEL Classification: D63

Suggested Citation

Lambert, Peter J. and Decoster, André, The Gini Coefficient Reveals More (February 2005). Available at SSRN: https://ssrn.com/abstract=809004 or http://dx.doi.org/10.2139/ssrn.809004

Peter J. Lambert (Contact Author)

University of Oregon - Department of Economics ( email )

Eugene, OR 97403
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

André Decoster

Department of Economics KU Leuven ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

HOME PAGE: http://www.andredecoster.be

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