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Source: John, D., MacArthur, C.T., 2000
The formula for calculating the Gini coefficient is, reordered as (Damgaard and Weiner, 2000)
Robin Hood index
"The Robin Hood index, is equivalent to the maximum vertical distance between the Lorenz curve and the line of equal incomes. The value of the index approximates the share of total income that has to be transferred from households above the mean to those below the mean to achieve equality in the distribution of incomes...? (John, D., MacArthur, C.T., 2000)
The Atkinson index I is based on the equity sensitive average income, ye, or the level of income per capita which if enjoyed by everybody would generate perfect distribution. The equity sensitivity average income is calculated with the formula:
The Atkinson index can be calculated as follows:
where ? represents the mean income. (John, D., MacArthur, C.T., 2000)
Theil's entropy measure
Theil's calculation of the income inequality considers the share of the group in total income (si) and the total number of groups (n) and it is calculated based on the formula:
(John, D., MacArthur, C.T., 2000)
Decile dispersion ratio
The ratio is calculated by diving the mean incomes of the ten wealthiest individuals by the average incomes of the ten poorest individuals. "This ratio is readily interpretable, by expressing the income of the rich as multiples of that of the poor...? (Measuring Inequality, 2007)
Modern economies strive to reach a perfectly even distribution of incomes, but encounter difficulties due to the numerous forces that generate and affect an unequal income distribution. There are several indices which calculate the income inequality, but in order to retrieve the most relevant results, these indices have to simultaneously calculated and correlated.
Various factors are taken into consideration when calculating the income distribution, out of which the nominal income is most common. Aside form this, attention should be given to consumption levels of both subsidy products (food, clothing, housing) as well as to luxury products and services. In addition, several social and demographic criteria of the population must be considered, such as the level of education, housing facilities (personal property or rental), industry in which the population activates (manufacturing, services, Information Technology or agriculture) and working and social conditions, such as access to housing or education. Also, political and economical factors must be taken into consideration, including international trade policies, governmental regulations, competition on the market or unemployment rate.
All statistical observations and analyses point out the sad fact that the American incomes are extremely unevenly distributed. "A statistical summary of U.S. family income distribution since World War II shows the following:
1. The U.S. family income distribution is highly unequal.
2. The degree of income inequality is not much greater today than it was at the end of World War II[continue]
"Entrepreneurship" (2007, December 10) Retrieved August 3, 2015, from http://www.paperdue.com/essay/entrepreneurship-33443
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