A few questions about measuring inequality

I have been reading and listening to great deal about inequality, happiness, poverty and related things recently. Here are a few questions:

1. What is included and left out of the famous Gini coefficient? Is it before or after adjustment for:-  tax, Social contributions, cash benefits housing benefit, council tax rebates, subsidised public housing, free education, free or subsidised healthcare?

It is also likely that declared income in tax returns is not the same as actual income as shown by expenditure. Do the calculators of Gini just use tax returns? (Actually, who does do the calculations and where are they published?)

2. Assuming that the data is taken from tax returns, is it not likely that the higher the tax rates, the more people hide their income? So to have apparent income equality, all a government has to do is have a high marginal tax rate. That may mean that the rich get poorer but to some extent it will mean that they are hiding income more actively and, in some cases, leaving the country. It does not represent a true reduction of inequality. I think the Swedish family who invented Tetrapak packaging left Sweden for England. If this is right, then the figures on unequal incomes are extremely unreliable and no theory should be built on them.

Incidentally, I have been reading When Prophecy Fails by Peter Saunders. It is a superb demolition of The Spirit Level which appears to use methods that are not in accordance with normal social science in order to pursue a political point. Unfortunately When Prophecy Fails was published in Australia and a copy is expensive. However it is downloadable from the CIS (Centre for Independent Stuides) website I think.


  1. Sweden, inequality and the unreliable Gini.
  2. Inequality: the final instalment with the benefit of a government statistic
  3. BBC propaganda about inequality
  4. Now THIS is a social housing programme: 36 million new homes!
  5. The drive towards ‘lower inequality’
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2 Responses to A few questions about measuring inequality

  1. Lindsay says:

    Also, Gini coefficient international comparisons appear in New Zealand’s Household Income Survey Report conducted by the state agency Statistics New Zealand. So I had assumed that other countries use similar survey methods to establish their Gini co-efficient.

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