Developing Gini and Zenga Indices for the Analysis

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Gini and Zenga Indices AVAILABLE for
the Analysis of Contextual Income
Inequalities within Canada
Bradley A. Corbett, PhD
Associate Research Professor
Richard Ivey School of Business
University of Western Ontario
Our Team
Bradley A. Corbett
Richard Ivey School of Business, University of Western Ontario,
London, Ontario, Canada
Francesca Greselin
Dipartimento di Metodi Quantitativi per le Scienze Economiche e Aziendali,
Universit_a di Milano Bicocca, Milan, Italy
Leo Pasquazzi
Dipartimento di Metodi Quantitativi per le Scienze Economiche e Aziendali,
Universit_a di Milano Bicocca, Milan, Italy
Rebecca Williams
University of Western Ontario,
London, Ontario, Canada
Ricardas Zitikis
Department of Statistical and Actuarial Sciences, University of Western Ontario,
London, Ontario, Canada
The study of Income Inequality is…
…a measure of income distribution in a
society.
Gini Coefficient
• Based on Lorenz curve
• Defined as A/(A+B)
• When A=0, Gini=0;
represents perfect equality
• When B=0, Gini=1;
represents perfect
inequality
• Uses ratio of lower incomes
to overall mean of the
population
Global Changes in the Labour Market,
Incomes and the Canadian Context
OECD (2011)
• Income inequality is on the rise in nearly all member countries
• High earner incomes are increasing twice as fast as low earner
incomes
– Loss of middle class jobs such as manufacturing in developed
countries
– Shift from an industrial to a service economy
• Increase in technical jobs (higher associated incomes)
• Increase in sercvice jobs (lower associated incomes)
– Higher education no longer guarantees the prospect of a ‘better
life’ but the ‘right education’ is now important
Some additional mitigating factors in Canada
– Poverty among aboriginal peoples
– Exploitation of natural resources in some provinces
Changes in the Tails of the Income
Distribution
Frenette, Green & Milligan (2007)
• Study of income inequality in Canada from 1980-2000
• Argued existing [survey] data sources may have missed
changes in the tails of the income distribution
• Demonstrated that the Census was a better data source than
the standard Survey of Labour and Income dynamics
• Also argued many of the changes in the distribution of income
have occurred in the tails of the distribution over time
• Changes in the tails may not be adequately detected by the
Gini Index if the mean remains stable while the tails grow fat
Scatter Plot of Canadian Census
Divisions: Gini vs. Zenga
Gini Index Quintiles in Canada: 2006 Census, After Tax, Census Families
Gini and Zenga Indices Available
• 2006 Canadian Census (2005 Incomes)
–
–
–
–
–
a 20% sample from the 2006 Census (~6 Million)
Household incomes
Incentive for low income to submit tax (2000)
Missing data supplemented by tax data
Sampling Weights based on Census
• Provincial and Census Division levels of analysis
• Income includes market income + government
transfers
• One family member per household selected
Gini and Zenga Indices are AVAILABLE for Merging:
Provincial and Census Divisions in Canada
(2006 Census; Provincial shown below)
Economic Families
No Adjustments
GINI
Census Families
Adjusted
No Adjustments
Before Tax
After Tax
Before Tax
After Tax
Before Tax
After Tax
BC
0.45481
0.42086
0.41603
0.37584
0.46636
0.43117
Alberta
0.47456
0.43898
0.43568
0.39430
0.48730
0.45117
Saskatchewan
0.44137
0.40688
0.40275
0.35478
0.45575
0.42123
Manitoba
0.43836
0.40314
0.39709
0.36183
0.45347
0.41783
Ontario
0.45483
0.41539
0.41592
0.37004
0.46837
0.42783
Quebec
0.43504
0.39750
0.38983
0.34236
0.44338
0.40523
New Brunswick
0.41026
0.37520
0.36600
0.32483
0.41904
0.38304
Nova Scotia
0.42159
0.38550
0.37850
0.33618
0.43059
0.39351
PEI
0.39318
0.36127
0.34777
0.30838
0.40098
0.36821
Newfoundland & Labrador
0.42057
0.37953
0.38094
0.33326
0.43297
0.39080
Contact Info:
Bradley A. Corbett, PhD
Richard Ivey School of Business
University of Western Ontario
519-850-2971
[email protected]
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