A Measurement of Income Inequality According to Relative Income: Foundations, Simulation and Calculation for Peru, 2004 - 2017
DOI:
https://doi.org/10.25097/rep.n37.2023.04Keywords:
Distributive inequality, relative income, Nash criterion, social welfare, Distributive inequality, relative income, Nash criterion, social welfareAbstract
To propose an index for measuring income inequality based on the concept of relative income of the recipients and to carry out simulations. The index is referenced in descriptive statistical measures; as well as grounded in a framework of social welfare theory. The analytical foundation of the inequality measurement index is presented, summarized in the geometric mean and the arithmetic mean as expressions of effective and maximum well-being respectively. The proposed index may present problems if there are recipients with zero income; however, it can be approximated if you work with quantiles. Furthermore, it does not fulfill certain desirable properties of the inequality index. The measure of inequality based on descriptive statistics has a normative framework. The index presents a good performance measuring the inequality in the simulations under the Pareto, log normal and log logistic distributions. It also has a high correlation with the Gini index.
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