Chapter 3 Inequality Measurement

Another problem faced by societies is inequality. Economic inequality can have several different meanings: income, education, resources, opportunities, wellbeing, etc. Usually, studies on economic inequality focus on income distribution.

Most inequality data comes from censuses and household surveys. Therefore, in order to produce reliable estimates from this samples, appropriate procedures are necessary.

This chapter presents brief presentations on inequality measures, also providing replication examples if possible. It starts with an initial attempt to measure the inequality between two groups of a population; then, it presents ideas of overall inequality indices, moving from the quintile share ratio to the Lorenz curve and measures derived from it; then, it discusses the concept of entropy and presents inequality measures based on it. Finally, it ends with a discussion regarding which inequality measure should be used.