Measuring inequality PDF
Preview Measuring inequality
Measuring Inequality LSEPerspectivesinEconomicAnalysis Serieseditors TimothyBesleyandFrankA.Cowell TheLSEPerspectivesinEconomicAnalysisseriesprovidesconciseandorigi- nalinsightintoawiderangeoftopicsineconomics.Eachbookisaccessibly written but scholarly to appeal to advanced students of economics, and academics and professionals wishing to expand their knowledge outside theirownparticularfield. Booksintheseries APrimerinSocialChoiceTheory,RevisedEditionbyWulfGaertner StrategyandDynamicsinContestsbyKaiA.Konrad MeasuringInequalitybyFrankA.Cowell Forthcomingbooks EconometricAnalysisofPanelDatabyVassilisHajivassiliou Measuring Inequality Frank A. Cowell Third Edition 1 3 GreatClarendonStreet,OxfordOX26DP OxfordUniversityPressisadepartmentoftheUniversityofOxford. ItfurtherstheUniversity’sobjectiveofexcellenceinresearch,scholarship, andeducationbypublishingworldwidein Oxford NewYork Auckland CapeTown DaresSalaam HongKong Karachi KualaLumpur Madrid Melbourne MexicoCity Nairobi NewDelhi Shanghai Taipei Toronto Withofficesin Argentina Austria Brazil Chile CzechRepublic France Greece Guatemala Hungary Italy Japan Poland Portugal Singapore SouthKorea Switzerland Thailand Turkey Ukraine Vietnam PublishedintheUnitedStates byOxfordUniversityPressInc.,NewYork ©FrankA.Cowell2011 Themoralrightsoftheauthorhavebeenasserted DatabaserightOxfordUniversityPress(maker) Firstedition1977 Secondedition1995 Thirdeditionfirstpublished2011 Allrightsreserved.Nopartofthispublicationmaybereproduced, storedinaretrievalsystem,ortransmitted,inanyformorbyanymeans, withoutthepriorpermissioninwritingofOxfordUniversityPress, orasexpresslypermittedbylaw,orundertermsagreedwiththeappropriate reprographicsrightsorganization.Enquiriesconcerningreproduction outsidethescopeoftheaboveshouldbesenttotheRightsDepartment, OxfordUniversityPress,attheaddressabove Youmustnotcirculatethisbookinanyotherbindingorcover andyoumustimposethesameconditiononanyacquirer BritishLibraryCataloguinginPublicationData Dataavailable LibraryofCongressCataloginginPublicationData 2010940330 TypesetbySPIPublisherServices,Pondicherry,India PrintedinGreatBritain onacid-freepaperby MPGBooksGroup,BodminandKing’sLynn ISBN 978–0–19–959403–0(Hbk.) 978–0–19–959404–7(Pbk.) 1 3 5 7 9 10 8 6 4 2 Thisbook isdedicatedtothememoryofmyparents. This page intentionally left blank Preface ‘Itisnotthebusinessofthebotanisttoeradicatetheweeds.Enoughfor himifhecantellusjusthowfasttheygrow.’ C.NorthcoteParkinson(1958),Parkinson’sLaw The maligned botanist has a good deal to be said for him in the company of rival gardeners, each propagating his own idea about the extent and the growth of thorns and thistles in the herbaceous border, and each with a patent weedkiller. I hope that this book will perform a similar role in the socialscientist’stoolshed.Itdoesnotdealwiththeoriesofthedevelopment of income distribution, of the generation of inequality, or of other social weeds,nordoesitsupplyanysocialherbicides.However,itdoesgiveaguide to some of the theoretical and practical problems involved in an analysis of the extent of inequality thus permitting an evaluation of the diverse approaches hitherto adopted. In avoiding patent remedies for particular unwanted growths, one finds useful analogies in various related fields—for example, some techniques for measuring economic inequality have impor- tantcounterpartsinsociologicalandpoliticalstudies.Thus,althoughIhave written this as an economist, I would like to think that students in these relateddisciplineswillbeinterestedinthismaterial. Thisbookisdeliberatelylimitedinwhatittriestodoasfarasexpounding theory, examining empirical evidence, or reviewing the burgeoning litera- tureisconcerned.Forthisreason,asetofnotesforeachchapterisprovided on pages 178ff. The idea is that if you have not already been put off the subjectbythetext,thenyoucanfollowuptechnicalandesotericpointsin thesenotes,andalsofindaguidetofurtherreading. A satisfactory discussion of the techniques of inequality measurement inevitably involves the use of some mathematics. However, I hope that people who are allergic to symbols will nevertheless read on. If you are allergic, you may need to toil a little more heavily round the diagrams that areusedfairlyextensivelyinChapters2and3.Infactthemostsophisticated pieceofnotationwhichitisessentialthatallshouldunderstandinorderto readthemainbodyofthetextistheexpression vii Preface (cid:2)n x, i i=1 representing the sum of n numbers indexed by the subscript i, thus: x + 1 x +x +...+x . Also it is helpful if the reader understands differentiation, 2 3 n thoughthisisnotstrictlyessential.Thosewhoarehappywithmathematical notation may wish to refer directly to Appendix A in which formal defini- tions are listed, and where proofs of some of the assertions in the text are given. Appendix A also serves as a glossary of symbols used for inequality measuresandotherexpressions. Associated with this book there is a website with links to data sources, downloadable spreadsheets of constructed datasets, and examples and pre- sentation files showing the step-by-step developments of some arguments andtechniques.Althoughyoushouldbeabletoreadthetextwithouthaving to use the website, I am firmly of the opinion that many of the issues in inequality measurement can only be properly understood through experi- ence with practical examples. There are quite a few numerical examples included in the text and several more within the questions and problems at the end of each chapter: you may well find that the easiest course is to pickupthedataforthesestraightfromthewebsiteratherthandoingthem by hand or keying the numbers into a computer yourself. This is described further in the Appendix A (page 177), but to get going with the data you onlygotothewelcomepageofthewebsite. viii Acknowledgements Thisbookisinfactthethirdeditionofaprojectthatstartedalongtimeago. So I have many years’ worth of intellectual debt that I would like to break upintothreetranches: AcknowledgementsfromtheFirstEdition I would like to thank Professor M. Bronfenbrenner for the use of the table onpage98.Thenumberofcolleaguesandstudentswhowilfullysubmitted themselves to reading drafts of this book was most gratifying. So I am very thankful for the comments of Tony Atkinson, Barbara Barker, John Bridge, David Collard, Shirley Dex, Les Fishman, Peter Hart, Kiyoshi Kuga, H. F. Lydall, M. D. McGrath, Neville Norman, and Richard Ross; without them there would have been lots more mistakes. You, the reader, owe a special debttoMikeHarrison,JohnProops,andMikePullenwhopersistentlymade me make the text more intelligible. Finally, I am extremely grateful for the skill and patience of Sylvia Beech, Stephanie Cooper, and Judy Gill, each of whom has had a hand in producing the text; ‘so careful of the type she seems’,asTennysononceputit. AcknowledgementsfromtheSecondEdition In preparing the second edition I received a lot of useful advice and help, particularlyfrompastandpresentcolleaguesinSTICERD.Specialthanksgo to Tony Atkinson, Karen Gardiner, John Hills, Stephen Jenkins, Peter Lam- bert, John Micklewright, and Richard Vaughan for their comments on the redrafted chapters. Z. M. Kmietowicz kindly gave permission for the use of hisrecentworkinQuestion8onpage152.ChristianSchlüterhelpedgreatly withupdatingtheliteraturenotesandreferences.Alsowarmappreciationto Elisabeth Backer and Jumana Saleheen without whose unfailing assistance therevisionwouldhavebeencompletedinhalfthetime. ix
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