Abstract

AVALOS ALVARADO, Eloy Eduardo. A Measurement of Income Inequality According to Relative Income: Foundations, Simulation and Calculation for Peru, 2004 - 2017. Revista Economía y Política [online]. 2023, n.37, pp.48-75.  Epub Jan 30, 2023. ISSN 2477-9075.  https://doi.org/10.25097/rep.n37.2023.04.

In this article, an income inequality index is proposed based on the concept of relative income of the recipients, and simulations are carried out under the Pareto, log normal and log logistic distributions for its calculation. The proposal is novel in the economic literature since the index is referenced in descriptive statistical measures and at the same time is based on a framework of social welfare theory. The analytical basis of the index allows interpreting the geometric mean ratio - arithmetic mean as an expression of the effective well-being - maximum well-being relationship. The proposed index does not meet some of the desirable properties; however, it is a measure of inequality based on descriptive statistics that has a normative framework: the Nash welfare function. In addition, it complements the formulation of an Atkinson index of inequality aversion equal to one. The index presents a good performance in the simulations, presenting a high correlation with the Gini index.

Keywords : Social welfare; Nash criterion; distributive inequality; inequality index; relative income.

        · abstract in Spanish     · text in Spanish     · Spanish ( pdf )