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Income inequality

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Measures of income inequality are based on data on people's household disposable income. Disposable income is gross household income following deduction of direct taxes and payment of social security contributions. It excludes inkind services provided to households by governments and private entities, consumption taxes, and imputed income flows due to home ownership and other real assets. People are attributed the income of the household to which they belong. Household income is adjusted to take account of household size by assuming a common equivalence scale of 0.5. The main indicator of income distribution used is the Gini coefficient. Values of the Gini coefficient range between 0 in the case of "perfect equality" (each person gets the same income) and 1 in the case of "perfect inequality" (all income goes to the share of the population with the highest income). An inter‐decile income ratio, the ratio between the upper limit of the 9th decile and that of the 1st decile, is also used.

Document Type: Review Article

Publication date: May 1, 2009


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