Unbottling the Gini: New Tools from an Old Concept
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The Gini index signals only the dispersion of the distribution and is not very sensitive to income differences at the tails of the distribution, where it would matter most. In the current work, novel inequality measures are proposed that address these limitations. In addition, two related measures of skewness are established. They all are based on a pair of functions that is obtained by attaching simple weights to the distances between the Lorenz curve and the 45-degree line, both in ascending and descending order, resulting in a pair of alternative inequality curves. The inequality measures derived from these two alternative inequality curves either complement the information about distributional dispersion measured by the Gini coefficient with information about distributional asymmetry, or are more sensitive to income differences at both tails of the distribution. The novel tools measure inequality appropriately and their Lorenz-based graphical representations give them intuitive appeal. Beyond socioeconomics, they can be applied in other disciplines of science.
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