January 2022

IZA DP No. 14996: Getting the Measure of Inequality

I focus on one of the most-commonly-cited 'facts'; about UK income inequality – that it has changed little over the last 30 years – and reflect on how robust that description is. I look at a number of fundamental issues in inequality measurement related to inequality concepts (e.g., inequality aversion, relative versus absolute inequality, and inequality of opportunity versus outcome), definitions of 'income', the income-receiving unit, and the reference period, and related data issues. There are grounds for arguing that income inequality levels are higher, and the inequality increase over time greater, than conventional approaches indicate.