Pakistan Institute of Development Economics



Inequality of Income and of Disutility

Author: Henri Theil

Income has been distributed unequally since times immemorial. Efforts to statistically estimate income distributions and income inequality date back to the beginning of econometrics. The Pareto distribution and the Gini concentration index are among the most well-known examples. There is inequality among the incomes of the people who constitute a nation; there is also inequality among the per capita incomes of different nations. We may presume that the latter type of inequality has increased substantially since the Western world started its economic development, but the actual measurement of this increase is seriously hampered by the fact that the per capita incomes of different nations are expressed in different currencies. Attempts to express these per capita incomes in a common currency by means of the usual exchange rates will typically lead to substantial errors.

Henri Theil

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