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Measuring Income Inequality: Comments on "Do Nations Just Get the Inequality they Deserve? The 'Palma Ratio' Re-examined" by Jose Gabriel Palma

Stiglitz, Joseph E.

Jose Gabriel Palma has identified an important empirical regularity that has not been recognized in the past: the share of the middle is relatively constant across countries. He doesn't really provide an explanation of this regularity, but even without such an explanation, it should be clear that it's an important empirical observation with implications for both empirical work and policy. It says that the Gini coefficient may not best capture what is really going on when making comparisons of distributions across countries or over time. In the case of any measure, the focus ought to be on where there is variability and if this regularity is really true in the way that he has described it, then it means that variability can be found in the share at the top and the share at the very bottom. The middle, he demonstrates, just takes the same fraction of the pie. Differences across countries are, thus, to be found in the ratio of the share at the top to that at the bottom.


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Also Published In

Inequality and Growth: Patterns and Policy, Volume II: Regions and Regularities
Palgrave Macmillan

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April 15, 2019


Also published in IEA Conference Volume No. 156-II/