Friday, March 4, 2016

On the distribution of income

There are lots of silly things that can be done with income distribution statistics.  Here is another to add to the list.

Decile Shares of Equivalised Disposable Income

The above tables shows the share of equivalised disposable income going to each income decile in the 28 Member States of the EU.  Two countries are highlighted: Ireland and Sweden.

Some commonly used summary statistics of the income distributions in both countries:

1: Gini Co-efficient (zero being complete equality)

  • Ireland: .307
  • Sweden: .254

2: 80/20 Quintile Share (zero being complete equality)

  • Ireland: 4.7
  • Sweden: 3.9

On both measures Sweden has a more equal distribution of equivalised disposable income than Ireland.  However, the table above shows that these summary statistics can miss some of the detail.  In this instance it is the share of equivalised disposable income that goes to the middle of the income distribution.

In Sweden, 37.6 per cent of equivalised disposable income accrues to those from the fourth to seventh deciles; for Ireland it is 34.1 per cent.  If the share of income in this middle range of the Irish income distribution matched that of Sweden then these households would have around €3 billion extra of disposable income or nearly €5,000 per household.  This would come from a reduced share at the top of the income distribution.

Sweden doesn’t follow the “ideal” position in the table above of starting in the top left corner with a relatively high income share to the lower deciles and moving to the bottom right corner for a relatively low income share for the top deciles. Sweden starts off the in middle of the ranking for the bottom deciles and then rises to having the highest income shares in the middle before moving to having the lowest income share for the top decile.  Ireland pretty much starts at the same position for the bottom decile but moves in the opposite direction through the deciles.

Of course, there can be a multitude of reasons why the income share in the middle of the distribution is much greater in Sweden than in Ireland – earnings, taxes and transfers among others all play a role.  We don’t address those here but are merely pointing out that the difference exists.

1 comment:

  1. Seamus, can you pls provide a link to the source of this data? This is a picture, apparently a screenshot from Eurostat, but I can't figure out how to get to the actual data.