Chapter 4 Inequality Measurement

Another problem faced by societies is inequality. Economic inequality can have several different meanings, including (but not limited to) income, education, resources, opportunities, and well-being. Usually, studies on economic inequality focus on income or wealth distribution.

Most inequality data comes from censuses and household surveys.6 Some recent approaches based on combining surveys, censuses, tax records and/or national accounts. Therefore, in order to produce reliable estimates from survey data, design-based estimation procedures must account for complex sampling designs.

This chapter presents the inequality measures available in the convey library with replication examples where possible. It starts with an attempt to measure inequality between two groups of a population, then summarizes the general idea of inequality indices by discussing techniques like the quintile share ratio, the Lorenz curve, and the commonly-used Gini coefficient. Next, this chapter discusses the concept of entropy and presents inequality measures (and their decompositions) based on that concept. This chapter concludes with a discussion regarding the trade-offs of selecting among the various inequality measures.