The Moving Fault Lines of Inequality
Measuring Inequality

Inequality measurement can take many forms. Depending on what kind of inequality is being measured (economic, health, education, etc.), different types of indicators will be used (revenue, wealth, average years of schooling, life expectancy…). Measuring inequality further depends on the units of measurements (individuals, households, tax-paying units, etc.) and the types of entities/groups that are being compared. Measuring inequality across country or regions thus differs from measuring inequality within a given society (e.g., between specific segments of a given population) or between citizens globally.
Gini Index
The most common index to measure economic inequalities in terms of revenue or wealth is the Gini coefficient. It measures the extent to which the distribution of income across a society deviates from a perfectly equal distribution. It is based on the Lorenz curve, which represents the cumulative proportion of the population on the horizontal axis and the cumulative proportion of income on the vertical axis. If one person earned all income (maximum inequality) the Gini coefficient would be equal to 1. If income was shared equally between all, the Gini coefficient would equal 0.
Palma Index (or Ratio Measures)
Ratio measures compare how much revenue or wealth is held by a specific segment of the population as compared to another. They allow to adjust for the Gini index’s oversensitivity to changes in the middle of the distribution. The Palma ratio, for instance, measures the share of national income of the top 10% compared to that hold by the lower 40%. In more equal societies this ratio will be 1 or below but in very unequal societies it might go up to 7.
Theil Index
Theil indexes, finally, measure inequality in terms of how wealth or revenue is spread among different regions (e.g. urban and rural).
For further reading:
- UNDESA, Inequality Measurement, Development Issues no 2, 21 October 2015
- GSDRC, “Measuring Inequality”