Assessing Income Inequality beyond Aggregate Measures

• In Event: 2204 - New Approaches to Understanding and Addressing Inequality

Abstract

In common sociological research, income inequality is measured at the aggregate level. The main purpose of this paper is to demonstrate there is more than meets the eye when inequality is indicated by a single measure. In this paper, I introduce an alternative method that evaluates individuals’ contributions to inequality as well as the between-group and within-group components of such contributions. I first highlight three common inequality measures, the Gini index and two generalized entropy measures—Theil’s T and Theil’s L indices—by presenting their individual components as a method for evaluating inequality. Five hypothetical datasets are used to illustrate these individual components first. The empirical analysis to follow focuses on the differences between the 2007 and 2017 Current Population Survey data revealed by these individual inequality components. The individual inequality measures can reveal patterns of inequality concealed by single measures at the aggregate level.

Author

• Tim Futing Liao, University of Illinois