Lecture (ppt 2) Inequality: Concepts, Measures and Experience

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Presentation transcript:

Lecture (ppt 2) Inequality: Concepts, Measures and Experience Andrés Solimano Course Prague – University of Economics, November 2014

Concepts of Inequality Income (flow) Wealth (stock) Territorial activity Opportunities Gini coefficients

Measures of Inequality Gini coefficient Robin Hood Index (of redistribution). Share of top 1 percent, top 5 percent. Ratios of top 10 percent to bottom 40 percent.

Gini and Lorenz Curve

Different values for Ginis

Redistribution

Robin Hood Index

What is the Robin Hood Index? The Robin Hood index is equivalent to the maximum vertical distance between the Lorenz curve, or the cumulative portion of the total income held below a certain income percentile, and the Perfect Equality Line, that is the 45 degree line of equal incomes. The value of the index approximates the share of total income that needs to be transferred from households above the mean to those below the mean to achieve equality in the distribution of incomes.

Global Inequality Wide differences in Gini coefficients (between 25 and 60 percent). Increase in inequality in the US, UK, Russia, China since the 1980s. No significant increases in inequality in Central Europe or Japan.

Lorenz Curve (129 paises) Figure 2.4. - Lorenz Curves for Income and Wealth Distributions Source: own elaboration based on World Bank’s WDI (2007) and Davies et al. (2006) (129 countries, circa year 2000) Source: own elaboration based on World Bank’s WDI (2007) and Davies et al. (2006) [WIDER-UNU Project on World Wealth Distribution]. See Annex for details.

Gini Coefficient (<30 percent)

Gini Coefficient (30-35 percent )

GINI (30-35 percent)

GINI (36-40)

Gini (46- 50 percent)

Gini (51-55)

Gini (56-60+percent )

Inequality of Income and Wealth Income is less unequally distributed than wealth Higher Gini coefficient for Income than wealth. Labor income is less unequally distributed than capital income. Market income is more unequally distributed than net income (adjusted by taxes and transfers).

Definitions Market Income= wages + profits+ rents + interests payments Net Income= Market income plus transfers minus taxes Net Wealth= Assets minus liabilities = Financial assets + capital assets + housing minus liabilities

Gini Coefficient for Income and Wealth (OECD and World) Andrés Solimano 20

Gini de Ingreso y Riqueza en la OECD

Size Distribution of Income and Wealth in the United States (1983-2010)

Wealth Composition in the United States (1983-2010)

Wealth and Income Distribution in the United Kingdom (2006-2008)

Gini by type of wealth asset in the United Kingdom

Wealth and Income Distribution in Chile

Composition of wealth in Chile by deciles

Income Distribution in South -Africa, 2008-2012

Income by racial group in South- Africa