Title: Only the Top Counts? Power Law Distributions and the Measurement of Income Inequality
Abstract: In recent years numerous studies published top income shares as way to assess the degree of income inequality. Top income shares measure how much percent of total income is captured by a certain top income group. Based on the assumption that high incomes follow a Pareto distribution, estimates from the World Inequality Database show that globally, the top 1% receive about 20% of world income. This number clearly suggests that income and power concentration is a serious issue. But what do top income related inequality measures really tell in terms of inequality and distribution of resources? The analysis of top incomes only takes incomes above a certain minimum threshold into consideration and leaves out income information below. This one-sided view on the income distribution gives reasons why related inequality measures may only pose a weak proxy for overall income inequality. In fact, as well-known researchers highlighted, a thorough analysis of inequality requires consideration of the complete income distribution. In that fashion, thispaper takes a critical view on top incomes as means of measuring inequality.
Publication Year: 2021
Publication Date: 2021-01-01
Language: en
Type: article
Indexed In: ['crossref']
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