Atkinson index: Difference between revisions

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where <math>y_{i}</math> is individual income (''i'' = 1, 2, ..., ''N'') and <math>\mu</math> is the [[mean]] income. With <math>\varepsilon=1</math>, we have <math>A=1-\exp(M)</math> where M is the [[mean log deviation]].
 
Atkinson index relies on the following axioms:
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# The index satisfies population replication axiom: if a new population is formed by replicating the existing population an arbitrary number of times, the inequality remains the same: <math>A_\varepsilon(\{y_1,\ldots,y_N\},\ldots,\{y_1,\ldots,y_N\})=A_\varepsilon(y_1,\ldots,y_N)</math>
# The index satisfies mean independence, or income homogeneity, axiom: if all incomes are multiplied by a positive constant, the inequality remains the same: <math>A_\varepsilon(y_1,\ldots,y_N) = A_\varepsilon( ky_1,\ldots,ky_N)</math> for any <math>k>0</math>.
# The index is subgroup decomposable.<ref>Shorrocks, AF (1980). The class of additively decomposable inequality indices. ''Econometrica'', 48 (3), 613-625613–625, {{doi|10.2307/1913126}}</ref> This means that overall inequality in the population can be computed as the sum of the corresponding Atkinson indices within each group, and the Atkinson index of the group mean incomes:
:: <math>
A_\varepsilon(y_{gi}: g=1,\ldots,G, i=1,\ldots,N_g) = \sum_{g=1}^G w_g A_\varepsilon( y_{g1}, \ldots, y_{g,N_g}) + A_\varepsilon(\mu_1, \ldots, \mu_G)
</math>
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* Sen A, Foster JE (1997) ''On Economic Inequality'', Oxford University Press, ISBN 978-0-19-828193-1. ([http://www.poorcity.richcity.org/oei/#Atkinson Python script] for a selection of formulas in the book)
* [http://www.wider.unu.edu/research/Database/en_GB/database/ World Income Inequality Database], from [[World Institute for Development Economics Research]]
* [http://www.census.gov/hhes/www/income/incineq/p60204/p60204txt.html Income Inequality, 1947-19981947–1998], from [[United States Census Bureau]].
 
== External links ==