Whether and How to Measure Inequality Post-2015 – Alex Cobham

September 24, 2013

Will reduced inequality be included in some form in the post-2015 development goals? Should it be? And, if so, what is the appropriate yardstick?

These were the questions explored last week at a CGD conference, Filling the Gap: Inequality Indicators for Post 2015 (agenda and video available). In this week’s Wonkcast, I discuss the issue with CGD research fellow Alex Cobham, who spoke at the conference about his new paper, joint with Andy Sumner, on the Palma, a proposed alternative to the commonly used Gini measure of inequality.

The conference brought together technical experts and policymakers to consider the strengths and weaknesses of various approaches to measuring and understanding inequality—and the potential application of these measures in setting national and global policy targets, including within the post-2015 goals.

In opening keynote remarks, UN under-secretary-general Rebeca Grynspan, the deputy administrator of the UN Development Program, offered an update on the process of setting the post-2015 goals and described the extensive consultations undertaken by the UN as an input to that process.

Alex argued for a measure he and Andy Sumner call the Palma, a ratio of the share of income of the top 10% of households to the bottom 40% of households, on the grounds that the 50% of households in the middle pretty consistently receive 50% of the income, across countries and over time. Also, he said, differences in the Gini, the most widely used measure of inequality, are driven almost entirely by the same differences as those reflected in the Palma - but only with the Palma is this made clear.

James Foster drew on his new book, A Unified Approach to Measuring Poverty and Inequality: Theory and Practice, to argue for an approach that considers income standards as building blocks for basic measurement, then uses them to construct inequality and poverty measures.

Nora Lustig said that whatever measure of inequality is used, the important thing it to examine policies that countries use to reduce inequality that is the result of unbridled market forces. Nora showed that there was a wide variation across countries in how much redistribution is achieved through taxes and transfers, reflecting varying degrees of commitment to using fiscal tools to attain more equitable societies. You can get an idea of this approach from her slides and the Commitment to Equity Index, which analyzes the impact of taxation and social spending on inequality and poverty in individual countries, and provides a roadmap for efforts to build more equitable societies.

He discusses the seeming tension, also noted at the CGD conference, between the UN public consultation consensus in favor of greater attention to inequality and the views of the High Level Panel on Post-2015 Development Agenda, which preferred the phrase “leave no one behind” and equality of opportunity (see report) to an explicit focus in inequality.

The difference may seem subtle to those not following the debate closely. The distinction: a focus on inequality necessarily includes attention to the (sometimes very large) share of income controlled by the richest and most powerful, whereas focusing on the deprivation of the poor does not.

Want more? Watch the conference videos and listen to my interview with Alex in which, among other things, he offers his views on the current state of UN discussions on the inclusion of inequality in the post-2015 goals and makes the case for the Palma. In closing remarks, Nora Lustig does a great job of pulling together the many ideas of the conference and describing some possible CGD work on the issue.

Howard Schneider of the Washington Post also wrote about the conference on the Wonkblog with the title: The World’s Leading Development Economists Can’t Agree on How to Tackle Inequality

Alex Cobham and co-author Andy Sumner produced this video making the case for the Palma.

My thanks to Aaron King for shooting and editing video clips and for an initial draft of this blog post, and to Kristina Wilson for recording the Wonkcast.

UNDP traducción español


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.