A Bohemian Rhapsody
Is this the real life,
Is this just fantasy?
Income equity is a real phenomena based on real data, not just the product of fantasy,
Many measures have been proposed to measure income inequality:
the Gini coefficient, the Atkins coefficient, various percentiles of income,
etc. If Standard Deviations of household
income were available, the Median, Mean, and Standard Deviation of those household
incomes could be used to compute the Skew of household income compared to a normal
distribution of household income. The Standard
Deviations of household incomes are not often reported, while the Mean and Median
household incomes are commonly reported. Zimmerman[1]
suggested comparing the Mean and Median household income as a measure of
equity.
The LIS Cross-national data Center in Luxembourg reports
on various economic measures . It
reports Median and Mean household incomes for 51 countries during the period
1967 to 2016[2]. An Income Equity Index (Mean income divided
by Median income) was computed from this data.
The results of this analysis are shown below.
Figure 1 Income Equity
Index by Country
By inspection, an equity index of less than 1.2 appears to
be common in most countries, particularly in the more developed countries. If income followed a normal statistical distribution,
the Mean would be equal to the Median
and the Income Equity Index would be 1.0.
However, this is only possible if negative incomes were also
possible. Since income less than 0 are
not reported, an Income Equity Index of greater than 1 should be expected.
In most countries, the Income Equity Index is either
decreasing or stable over the period of the LIS data. Only four countries have
a forecast 2018 Income Equity Index greater than 1.2 where the Income Equity Index
is also increasing over time. In two of
those countries, Lithuania and Romania, this forecast is based on only 2 years
of data and the forecasts for these countries are not statistically significant. The forecasts in the remaining countries, the
United Kingdom and the United States are based, respectively, on 13 years and
12 years of data and are statistically significant. This historical data is
shown graphically in Figure
2.
.
For both countries,
the largest and fastest increase in the Income Equity Index occurred during the
period between 1980 and 1994 although the Income Equity Index is still increasing
after this period. A common thread in both counties during this period is Arthur
Laffer, who served as an economic advisor to both the Reagan and Thatcher administrations
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