Measuring income inequalities beyond the Gini coefficient

Luptáčik, Mikuláš and Nežinský, Eduard (2019) Measuring income inequalities beyond the Gini coefficient. Central European Journal of Operations Research. pp. 1-18. ISSN 1613-9178


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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.

Item Type: Article
Keywords: Income Distribution, Rawlsian utility, Data envelopment Analysis, Weights restristion, Malmquist index
Divisions: Departments > Volkswirtschaft > Makroökonomie > Nowotny E./Luptacik
Version of the Document: Published
Depositing User: ePub Administrator
Date Deposited: 13 Dec 2019 12:15
Last Modified: 13 Dec 2019 12:23
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