Is It All About the Tails? The Palma Measure of Income Inequality

Cobham, Alex; Sumner, Andy

doi:10.2139/ssrn.2366974

Cited by 91 publications

(61 citation statements)

References 16 publications

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“…256–257). In short, the Gini is relatively oversensitive to changes in the middle (relative to changes at the extremes of the distribution; and also relatively insensitive at higher levels of inequality (see Cobham and Sumner, ; )). Does it matter that this is not explicit?…”

Section: Inequality Measurementmentioning

confidence: 99%

Inequality and the Tails: the Palma Proposition and Ratio

2016

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The Palma Proposition is that changes in income or consumption inequality are (almost) exclusively due to changes in the share of the richest 10 per cent and poorest 40 per cent because the ‘middle’ group between the richest and poorest tend to capture approximately 50 per cent of gross national income (GNI). The Palma Ratio is a measure of income or consumption concentration based on the above‐mentioned proposition and calculated as the GNI capture of the richest 10 per cent divided by that of the poorest 40 per cent. In this paper we revisit the empirical basis of the Palma Proposition (the relative stability of the ‘middle’) with a new and expanded data set across and within developing and developed countries. We find the data reaffirms the Palma Proposition and that the proposition is getting stronger over time.

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Section: Inequality Measurementmentioning

confidence: 99%

Inequality and the Tails: the Palma Proposition and Ratio

2016

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“…Another example of θ F that differs from µ F is provided by the Palma index; we refer to Cobham and Sumner (2013a, 2013b for details. Namely, let θ F be the average of the top 10% of the population incomes, that is, θ F = 1 0.1 1 0.9 F −1 (t)dt.…”

Section: From the Mean To Generic Societal Referencesmentioning

confidence: 99%

From the Classical Gini Index of Income Inequality to a New Zenga-Type Relative Measure of Risk: A Modeller’s Perspective

Greselin

Zitikis

2018

Econometrics

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Abstract:The underlying idea behind the construction of indices of economic inequality is based on measuring deviations of various portions of low incomes from certain references or benchmarks, which could be point measures like the population mean or median, or curves like the hypotenuse of the right triangle into which every Lorenz curve falls. In this paper, we argue that, by appropriately choosing population-based references (called societal references) and distributions of personal positions (called gambles, which are random), we can meaningfully unify classical and contemporary indices of economic inequality, and various measures of risk. To illustrate the herein proposed approach, we put forward and explore a risk measure that takes into account the relativity of large risks with respect to small ones.

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“…The average amount of VAT paid increases 14 One measure is used for poverty (the at-risk-of-poverty rate) and one for inequality (the Gini coefficient) because these two indicators are some of the most commonly used. The article does not provide space for a presentation of detailed robustness checks using alternative indicators, nor is it a suitable setting for a discussion of the insufficiencies of these two indicators, of which there are many; some of them are discussed in Cobham and Sumner (2013). 15 Note that most Czech pensions are not subject to income tax, with the exception of the extraordinarily high pensions received by a negligibly small proportion of individuals.…”

Section: Constructing Final Income From Market Incomementioning

confidence: 99%