publications new

 

Abstract

The Gini coefficient is widely used in academia to discuss how income inequality affects development and growth. However, extremely different Lorenz curves may provide different development and growth outcomes while still leading to the same Gini coefficient. This paper studies the development effects of “mean division shares,” i.e., the share of income held by people whose household disposable income per capita is below the mean income (mean income share) and the share of the population with this income (mean population share) using panel data. Our analysis explores how this income share and population share impact development and growth. It shows that the income and population shares affect growth in significantly different ways and that an analysis of these metrics provides substantial value compared to that of the Gini coefficient.