A simple method for measuring inequality

This paper introduces a new inequality index that addresses the limitations of the Gini index (less sensitive to inequality at the tails of income distribution) and inter-decile ratios (ignore inequality in the middle of the distribution). The index combines three indicators: the Gini index, the income share of the top 10%, and the income share of the bottom 10%. Using data from the World Bank and OECD, the authors demonstrate the index's ability to distinguish income inequality among countries with the same Gini index but different income gaps between the top and bottom 10%, and vice versa. The index also captures situations where the Gini index is stable but the ratio of income shares between the top and bottom 10% is increasing. The index is proposed as a measure of statistical heterogeneity applicable beyond socioeconomic income distribution.

Thitithep Sitthiyot, Kanyarat Holasut