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 in 2010 Based on the
Luxembourg Income Study Database
(ordered by Gini Ratio)

 

Gini Coefficient

Percentile Ratio (90/10)

Relative Poverty Rate (50%)

Norway

0.243

2.9

7.4

Iceland

0.245

2.8

6.1

Denmark

0.248

2.9

6.3

Slovenia

0.252

3.3

9.8

Czech Republic

0.256

3.1

6.3

Netherlands

0.257

3.0

5.2

Finland

0.261

3.2

7.2

Slovakia

0.263

3.3

8.0

Luxembourg

0.269

3.3

6.1

Hungary

0.278

3.5

7.9

Germany

0.286

3.6

9.5

France

0.289

3.6

9.1

Ireland

0.294

3.8

9.4

Poland

0.310

3.9

9.6

Canada

0.317

4.2

12.5

Taiwan

0.317

4.4

11.8

Serbia

0.324

4.9

14.6

Estonia

0.325

4.5

11.8

Italy

0.327

4.4

12.5

Australia

0.330

4.5

13.9

Greece

0.333

4.4

13.5

Spain

0.333

5.1

15.2

UK

0.335

4.2

9.8

Russia

0.338

4.7

12.5

USA

0.367

5.7

16.9

Israel

0.377

6.1

20.3

Uruguay

0.405

6.2

15.2

Georgia

0.437

8.2

19.5

Mexico

0.455

9.0

20.1

Brazil

0.460

8.4

19.7

Peru

0.470

13.9

25.3

Panama

0.471

11.0

23.1

Colombia

0.482

10.0

19.6

South Africa

0.585

22.6

25.7

 

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.

 

Relative Poverty

 

Regional Poverty Estimates in Developing Countries

poverty

 

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.