Inequality Measures: The Kolkata index in comparison with other measures

TL;DR

This paper surveys the Kolkata index as a novel measure of income inequality, comparing it with traditional indices like Gini, and demonstrates its advantages through theoretical analysis and empirical examples.

Contribution

It introduces the Kolkata index as a fixed point measure of inequality, highlighting its advantages over traditional measures like Gini and providing comparative analysis.

Findings

Kolkata index offers a better inequality measure than Gini.

The index is a generalized Hirsch index for inequality.

Empirical studies show differences between Kolkata index and Gini coefficient.

Abstract

We provide a survey of the Kolkata index of social inequality, focusing in particular on income inequality. Based on the observation that inequality functions (such as the Lorenz function), giving the measures of income or wealth against that of the population, to be generally nonlinear, we show that the fixed point (like Kolkata index k) of such a nonlinear function (or related, like the complementary Lorenz function) offer better measure of inequality than the average quantities (like Gini index). Indeed the Kolkata index can be viewed as a generalized Hirsch index for a normalized inequality function and gives the fraction k of the total wealth possessed by the rich (1-k) fraction of the population. We analyze the structures of the inequality indices for both continuous and discrete income distributions. We also compare the Kolkata index to some other measures like the Gini coefficient and the Pietra index. Lastly, we provide some empirical studies which illustrate the differences between the Kolkata index and the Gini coefficient.