Identifying inequality benchmark incomes

Many inequality measures have the property that for any income distribution there exists a benchmark income, above which adding incremental income increases inequality, and below which it decreases inequality. This presentation provides social preference conditions which characterize the existence of such an income. The key condition is a strong version of the Pigou- Dalton transfer principle. The results imply that benchmark incomes exist for virtually all known inequality measures. Surprisingly, benchmark incomes associated with ‘absolute’ and ‘centrist’ measures of inequality are sometimes higher than those implied by ‘relative’ measures. The results are illustrated using data from UNU-WIDER’s World Income Inequality Database. According to the Gini coefficient, benchmark incomes are typically found to lie between the 62nd and 85th percentiles, in the least, and most, unequal countries, respectively. In the global income distribution, ignoring national borders, the benchmark income, according to the Gini, lies in the 82nd percentile. The results imply that economic growth, together with falling inequality, even of the ‘absolute’ kind, are not sufficient conditions for a reduction in poverty.

Biography: Dr Laurence Roope (PhD MSc BSc)
Dr Laurence Roope is a Senior Researcher at the Health Economics Research Centre (HERC), part of the Nuffield Department of Population Health at the University of Oxford. He joined HERC in January 2013 after completing a PhD in Economics at the University of Manchester. His research interests lie broadly within development economics and health economics. He has particular expertise in the economics of poverty and inequality, and in applying economic principles to tackle global challenges such as antimicrobial resistance and air pollution. His academic work has been published in a wide variety of peer-reviewed journals, including the prestigious journal Science.

Dr Roope has worked as a consultant for the United Nations University World Institute for Development Economics Research (UNU-WIDER), and is an External Associate at the Global Development Institute (GDI, University of Manchester). Prior to working in academia he was a professional econometrician in the private sector.