COMPARATIVE ECONOMIC STATISTICS: INCOME DISTRIBUTION AND POVERTY

COMPARATIVE ECONOMIC STATISTICS:
INCOME DISTRIBUTION AND POVERTY

I. Income Distribution Comparisons--equality versus equity

A. Measures of Income Inequality

1. Decile ratio - the share of income received by the richest tenth of the population divided by the share received by the poorest tenth.

2. Lorenz Curves - Illustrates the percentage of income received by cumulative percentages of the population. (See this web site).

3. Gini ratio - Equal to the measured area between the diagonal line of equality and the Lorenz curve, divided by the area of the triangle under the line of equality.

4. Poverty rate - The percentage of the population living below a level of income that provides for basic needs

B. Problems in Making Income Distribution Comparisons -

1. Coverage of the population - data that cover only employed persons or workers will indicate greater equality than data that include retired persons or the unemployed

2. Segmentation of the population - Distribution of income among households can be different from the distribution of income among families or individuals.

3. Definition of income - Only wages? Capital gains? Before or after taxes? Including transfers? Based on consumption patterns rather than income?

C. Luxembourg Income Study - careful comparisons for 29 industrial countries according to common definitions of 42 income variables and 28 demographic variables.

Inequality Indices Based on the
Luxembourg Income Study Database
(ordered by Gini Ratio)

Country	Year	Gini Ratio	Decile Ratio
Slovak Rep.	1996	0.24	2.88
Finland	2000	0.25	2.9
Slovenia	1999	0.25	3.15
Belgium	1997	0.25	3.19
Norway	2000	0.25	2.8
Germany	2000	0.25	3.18
Sweden	2000	0.25	2.96
Netherlands	1994	0.25	3.15
Czech Rep.	1997	0.26	3.15
Luxembourg	2000	0.26	3.24
Austria	1997	0.27	3.37
Taiwan	1995	0.28	3.38
Romania	1997	0.28	3.38
France	1994	0.29	3.54
Poland	1999	0.29	3.59
Hungary	1999	0.3	3.57
Spain	1990	0.3	3.96
Canada	1998	0.31	4.13
Switzerland	1992	0.31	3.62
Australia	1994	0.31	4.33
Ireland	1996	0.33	4.33
Italy	2000	0.33	4.48
Israel	1997	0.34	4.86
U.K.	1999	0.35	4.58
Estonia	2000	0.36	5.08
U.S.	2000	0.37	5.45
Russia	2000	0.43	8.37
Mexico	1998	0.49	11.55

Table 2.6 Absolute and Relative Poverty Rates

	Year	Absolute Percentage Poor	Relative Percentage Poor
Australia	1987	29.9	15.2
Austria	1987	26.3	8.4
Canada	1987	11.3	11.5
France	1984	29.8	7.6
Germany	1984	30.6	6.6
Italy	1986	42.8	10.4
Luxembourg	1985	13.7	5.6
Netherlands	1987	42.4	5.0
Sweden	1987	34.9	9.1
U.K.	1986	35.9	9.2
U.S.	1986	17.7	17.7

Source: LIS data sets presented in McKinley L. Blackburn, “International Comparisons of Poverty,” American Economic Review 84 (May 1994), 372.

Regional Poverty Estimates in Developing Countries

Number of people living on less than $1.25 per day (millions)	1981	1990	1999	2005
East Asia and Pacific	1087.6	893.4	635.8	336.9
Of which China	835.1	683.2	446.7	207.7
E. Europe and Cen. Asia	6.6	7.0	25.7	23.9
Latin America and Carib.	44.9	46.7	58.4	45.1
Middle East and N. Africa	14.9	12.2	16.0	14.0
South Asia	557.3	574.4	588.9	595.8
Of which India	420.5	435.5	447.2	455.8
Sub-Saharan Africa	202.1	283.7	370.1	384.2
Total	1913.4	1817.5	1694.8	1399.8

$1.25 per day headcount index (percent)	1981	1990	1999	2005
East Asia and Pacific	78.8	56.0	35.6	17.9
Of which China	84.0	60.2	35.6	15.9
E.Europe and Cen. Asia	1.6	1.5	5.4	5.0
Latin America and Carib.	12.3	10.7	11.5	8.2
Middle East and N. Africa	8.6	5.4	5.8	4.6
South Asia	60.3	51.3	44.1	40.4
Of which India	59.8	51.3	44.8	41.6
Sub-Saharan Africa	50.8	54.9	56.4	50.4
Total	52.2	41.7	33.7	25.7

Source: "World Bank Updates Poverty Estimates for the Developing World," August 2008, available here

II. Wealth Distribution Comparisons

A. Generally more unequal than income. In the United States, for example, the richest 1 percent of households received about 9 percent of all income in 1986, but they owned about 31 percent of total wealth.

B. Data sources - Best are consumer wealth surveys, but we usually must rely on data collected from a small segment of the population in estate tax and wealth tax returns. In U.S. estimates, survey data generally reveal more inequality than estate tax data.