Measured Inequality of Income: What Does It Mean and What Can It Tell Us?

Abstract

What can be called the American standard method of reporting income inequality needs to be seen as a highly simplified treatment of a complex matter. Broad gen eralizations, particularly with regard to changes in inequality over time, are to be mistrusted. Special purpose distributions, including one on the distributional effects of a broadly con ceived system of transfers, might be more useful than the one overall distribution. The latter does not significantly help in understanding the causes of, and justifications for, existing income inequalities. It has had only limited use as a per formance indicator for the national economy and is seldom referred to when decisions about specific legislative measures that have redistributional effects are made. This may be because public concern does not focus upon overall income equality as such, but upon particular differences.