Alternative Distributions and Metrics

Chapter 2 sets out the range of alternatives distributions, and resulting summary measures, which could be used to compare inequality over time. Using an annual accounting period, alternative welfare metrics and units of analysis are investigated. Thirteen different distributions can be distinguished. In addition, the sensitivity to assumptions about economies of scale within households is examined, and changes in inequality are decomposed into those arising from population and tax structure changes. The answer to the question of whether inequality has risen or fallen depends crucially on the combination of welfare metric, income unit, adult equivalent scale and inequality measure used. In empirical studies it is therefore important to explore a wide range of alternative approaches, providing information for readers to make their own judgements.