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Measuring Inequality of Households' Income in Selected Balkan Countries: the Palma Inequality Measure vs the Gini Coefficient

The aim of the research is to study the income concentration using the Palma, an inequality measure introduced by Chilean economist Gabriel Palma in 2013, here calculated for the households’ income in selected countries. The Palma measure, defined as the ratio of households’ income share of the top 10% of households to the bottom 40%, shows that the “middle” 50% of the population, defined as households in the 5th to the 9th deciles, has a stable share of national income (around 50%), and, according to G. Palma, inequality is a question of the tails. For eight, mostly Balkan, countries, the World Bank data for 2002, 2008 and 2011 were analysed. The highest value of the Palma was in 2008 in the Rep. of Macedonia (2.34), meaning that the upper 10% of households have 2.34 times (or 134%) more income than the lower 40%. In the period from 2002 to 2011, Bulgaria, Rep. of Macedonia, Croatia and Hungary showed an increase, and Serbia, Turkey, Romania and Slovenia showed a decrease of the Palma measure of inequality. In the same time, Scandinavian countries had the Palma measure mostly below 1.00. At the end, the authors recommend complementing the Gini with the Palma inequality measure. Since, both the Gini and the Palma measure summarize the same information, in the future, if differences among “the richest” (the top 10%) and “the poorest” (the bottom 40%) would increase, the Palma, being more intuitive, would show it better than the Gini coefficient.

income concentration, inequality, Palma ratio, Gini coefficient

Abstract is published as follows: Dumičić, K., Akalović Antić, J. (2015). MEASURING INEQUALITY OF HOUSEHOLDS’ INCOME IN SELECTED BALKAN COUNTRIES: THE PALMA INEQUALITY MEASURE VS THE GINI COEFFICIENT. DEVELOPMENT, COMPETITIVENESS AND INEQUALITY IN EU AND WESTERN BALKANS BOOK OF ABSTRACTS, Editors: Mirjana Radović Marković, Snezhana Ilieva, Nenad Vunjak. International scientific conference: DEVELOPMENT, COMPETITIVENESS AND INEQUALITY IN EU AND WESTERN BALKANS, Belgrade, Serbia, November 26th 2015, p. 43-45. ISBN 978-86- 89465-19-8.