Inequality measures with explicit statements on weights and reference distribution

Abstract

In the above an inequality measure has been defined as a weighted measure of divergence of an observed distribution from a certain reference (cf. Section 2.1). This frame of reference is implicitly assumed to be the situation where everyone is concentrated at the mean income for the inequality measures discussed above. However, if the target distribution of society or policy-makers does not coincide with that of complete equality¹, the inequality indicators discussed are not very appropriate for serving as instruments in policy evaluation. They do not indicate how the obtained levels of inequality have to be interpreted in a policy context.