by Inequality within countries — getting worse or better? In a recent Twitter post, Max Roser of Our World In Data claimed that the narrative about rising inequality within countries is incorrect. Inequality has been falling in as many countries as it has been rising, he said, “which should be really embarrassing for many news stories that suggest the opposite with great certainty” … What Roser doesn’t mention in his tweet is that the Gini index used here is a relative measure. If the incomes of the poor increase at a faster rate than the incomes of the rich, the Gini index shows a decline in inequality even if the absolute income gap between the rich and poor continues to widen … So what’s going on here? Imagine that person A has an income of per day
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Lars Pålsson Syll considers the following as important: Economics
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Inequality within countries — getting worse or better?
In a recent Twitter post, Max Roser of Our World In Data claimed that the narrative about rising inequality within countries is incorrect. Inequality has been falling in as many countries as it has been rising, he said, “which should be really embarrassing for many news stories that suggest the opposite with great certainty” …
What Roser doesn’t mention in his tweet is that the Gini index used here is a relative measure. If the incomes of the poor increase at a faster rate than the incomes of the rich, the Gini index shows a decline in inequality even if the absolute income gap between the rich and poor continues to widen …
So what’s going on here? Imagine that person A has an income of $1 per day while person B has an income of $100 per day. If A’s income grows by 100% (to $2) while B’s income grows by only 90% (to $190), the Gini index shows that inequality is decreasing even though the absolute gap between the two has increased substantially, from $99 to $188.
We can correct for this by using the absolute Gini: simply take the Gini index and multiply it by the average income of each country. Doing so gives us a very different picture of inequality …
These results are in keeping with recent research showing that the absolute Gini increased for the world as a whole as well as in most world regions from 1975 to 2010.
