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Alternative Distributions for Inequality Comparisons
Author(s) -
Creedy John
Publication year - 2017
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/1467-8462.12238
Subject(s) - spurious relationship , econometrics , equivalence (formal languages) , inequality , economics , income distribution , unit (ring theory) , distribution (mathematics) , computer science , mathematics , statistics , mathematical analysis , mathematics education , discrete mathematics
Abstract This article provides an introductory review of the alternative possible income distributions that can be used when making cross‐sectional evaluations of inequality changes and the effects of taxes and transfers using a household economic survey. It attempts to clarify the various alternatives for users of data and those interpreting results. It focuses on the choice of income unit and the need to avoid spurious comparisons. The use of adult equivalence scales and the application of an explicit sharing rule are considered, as are comparisons over time where the tax structure and populations differ. Numerical examples highlight the alternative approaches and distributions.