This article provides an overview of the key issues in inequality measurement and shows how theoretical concepts are related to practical judgements. The principal axioms of distributional analysis are used to show the social-welfare underpinnings of standard ranking principles and to derive families of inequality indices. Recent developments that focus on income differences and reference income levels are examined.
KeywordsAtkinson inequality index Coefficient of variation Generalized Lorenz curve Gini coefficient Index numbers Inequality (measurement) Lorenz curve Pen’s parade Poverty Poverty line Principle of transfers Ranking Relative deprivation Risk aversion Social-welfare function Theil, H. Well-being
JEL ClassificationsD63 E25 D3
My thanks go to Yoram Amiel, Tony Atkinson, Sanghamitra Bandyopadhyay, Kristof Bosmans, Udo Ebert, Giovanni Ko, Peter Lambert and Abigail McKnight, who made helpful comments on an earlier draft.
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