Measurement of Inequality (published in Handbook of Income Distribution, A B Atkinson and F Bourguignon (eds), 1998)

The analysis of inequality is placed in the context of recent developments in economics and statistics. Prepated for Handbook of Income Distribution, edited by A B Atkinson and F Bourguignon.Inequality, social welfare, income distribution

Inequality among the Wealthy

Using the evidence from the Luxembourg Wealth Study it appears that the distribution of wealth in the UK is considerably less than in Canada, the US or Sweden. But does this result come from an underestimate of inequality among the wealthy and of the wealth differential between the rich and the rest? Using a Pareto model for the upper tail of the distribution we can see that the inequality of comparisons of the UK with the other countries is indeed robust.wealth distribution

Income Distribution and Inequality

What are the principal issues on which research on income distributionand inequality focus? How might that focus shift in the immediate future?Prepared for the The Elgar Handbook of Socio-Economics.

Income distribution and inequality measurement: The problem of extreme values

We examine the statistical performance of inequality indices in the presence of extreme values in the data and show that these indices are very sensitive to the properties of the income distribution. Estimation and inference can be dramatically affected, especially when the tail of the income distribution is heavy, even when standard bootstrap methods are employed. However, use of appropriate semiparametric methods for modelling the upper tail can greatly improve the performance of even those inequality indices that are normally considered particularly sensitive to extreme values.inequality measures ; statistical performance ; robustness

Tax Compliance by Firms and Audit Policy

Firms are usually better informed than tax authorities about market conditions and the potential profits of competitors. They may try to exploit this situation by underreporting their own taxable profits. The tax authority could offset firms' informational advantage by adopting "smarter" audit policies .that take into account the relationship between a firm's reported profits and reports for the industry as a whole. Such an audit policy will create an externality for the decision makers in the industry and this externality can be expected to affect not only firms' reporting policies but also their market decisions. If public policy takes into account wider economic issues than just revenue raising what is the appropriate way for a tax authority to run such an audit policy? We develop some clear policy rules in a standard model of an industry and show the effect of these rules using simulations.ca3Tax compliance, evasion, oligopoly

Sensitivity of Inequality Measures to Extreme Values

We examine the sensitivity of estimates and inequality indices to extreme values, in the sense of their robustness properties and of their statistical performance. We establish that these measures are very sensitive to the properties of the income distribution. Estimation and inference can be dramatically affected, especially when the tail of the income distribution is heavy.Inequality measures, statistical performance, robustness.

Theil, Inequality and the Structure of Income Distribution

This paper documents the impact of Argentina's recent economic crises on different aspects of poverty, with a special focus on the economic collapse of 2002. We discuss the methodology of poverty measurement in Argentina and we use a simple rule to compensate for the lack of regional poverty figures until 2001, providing consistent series of urban poverty estimates at the national and regional levels. We then present series of short term dynamics of poverty, decomposing the changes in every period of time with panel data. Finally, we analyse the determinants of poverty, with a focus on accounting for observed differences in income (and thereby poverty) between October 2001 and May 2002. Among other conclusions, we find in our decomposition analysis that households without the means to diversify their income sources suffered more than others from the crisis of 2002.Theil, inequality, independence, homotheticity, translatability.

Risk and Inequality Perceptions

We examine the relationship between risk analysis and inequality analysis, using a questionnaire-experimental approach .The experiments focus on the effect of income transformations on the perceived rankings of income distributions in either a risk or inequality context. Both context and income levels are important in influencing rankings.Risk, Inequality, Income transformations.

Inequality, Welfare and Monotonicity

We establish a general relationship between the standard form of the individualistic social-welfare function and the ?reduced-form? version that is expressed in terms of inequality and mean income. This shows the relationship between the property of monotonicity and the slope of the equity-efficiency trade-off. Particularly simple results are available for a large class of inequality measures that includes the Gini. These results do not require differentiability of the social welfare function.Inequality, social welfare monotonicity

The Class of Absolute Decomposable Inequality Measures

We provide a parsimonious axiomatisation of the complete class of absolute nequalityindices. Our approach uses only a weak form of decomposability and does not require a priori that the measures be differentiable.inequality measures, decomposability, translation invariance