Measurement and inequality

Inequality can be measured in many ways. The primary way most people look at inequality from a numerical perspective is “vertical” inequality. This is essentially, asking how much money those at the bottom 10% of the income bracket have compared to those at the top 10%. There is another obvious way to look at this however, which is inequality among different classes, races, groups, etc. of people. This can be referred to as “horizontal” inequality. Here is a post from Paul Krugman which discusses why horizontal inequality is important.

Vertical inequality can be measured in a few ways, but one of the more prominent forms is the Lorenz curve. This curve plots a percent of the income distribution on one axis, and what percent of the total income(or wealth, or anything else for that matter) that percent of the income distribution has. More information on the Lorenz curve can be found here..The Lorenz curve can also be boiled down to a single number, the Gini coefficient, which makes it easy to understand, and to make policy with respect to. It’s not perfect, but it is easy to look at, which is helpful for thinking about, and making comparisons across time and place. It strikes me as odd that we don’t have a similar measure for horizontal inequality.

If we assign people in society according to what group they identify with, it should not be that difficult to form an analogous version of the Lorenz curve, and Gini coefficient. The process would be to take each group, and sort them by their average income per person. You would then take the cumulative percentage of the population percent that group consists of and plot it against the cumulative income every group up to that group possesses. This might be confusing, so let me give a simple example.

Assume there are three groups, G1, G2, and G3. G1 is  15% of the population, and has 5% of the income. G2 is 30% of the population, and has 20% of the wealth. G3 is 55% of the population and has 75% of the wealth. The data points for the horizontal Lorenz curve are then (0,0), (.15,.05),(.45,.25),(1,1).  You can also calculate a Gini coefficient in the normal way, which if you’re interested you can read about here.

This is a possible way to measure horizontal inequality, and while it isn’t by any means perfect, it may be an easy, single number way for people to think about it.

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