Teaching Comparative Government and Politics

Wednesday, October 02, 2013

Measuring inequality

Ken Halla posted a link to this article by Max Fisher suggesting that the Palma ratio might be a better way to measure economic inequality than the familiar Gini Index. Right now the Gini numbers are more universally available, but putting the two measures alongside one another might offer some interesting insights.

There's a link in Fisher's article to a more complete explanation of the Palma index and video presentation as well.

How the world’s countries compare on income inequality (the U.S. ranks below Nigeria)
The way we measure income inequality is changing. After years of relying on a complicated metric called the Gini coefficient, some economists argue that we should adopt the Palma ratio, which measures the gap between the rich and the poor in a society…

The countries that come out looking best include, no surprise, the usual suspects of Northern Europe. Interestingly, Eastern Europe scores quite highly as well, as do some post-Soviet countries in Central Asia. Perhaps that's a legacy of Soviet-era social programs meant to flatten class divides. But it's also a reminder that, while economic equality is great, it's not synonymous with a healthy economy. Some countries are economically equal because everyone is well-off, as in Denmark, and some because most everyone is equally poor…

The United States doesn't come out of this comparison looking great. It's ranked 44th out of 86 countries, well below every other developed society measured. It's one spot below Nigeria… but above Russia and Turkey… countries that have experienced heavy political unrest in recent years…

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