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Professor Stephen Jenkins

Thank you very much.

[fereshte yousefzade]

Hello
To calculate the Palma ratio, should I consider the Household income or household per capita income? Which income is the criterion for calculating other indicators of inequality?

[Stephen Jenkins]

You need to think about what your measure of "income" is trying to represent. Read a standard inequality text or survey article and note well the discussion of issues such as: (1) the definition of "income" or "expenditure" (what components are/should be included); (2) whether and how to adjust measured incomes for differences in household size and composition ('equivalisation' issues); (3) the reference period over which income/expenditure is measured; (4) the unit over which incomes/expenditures are aggregated (individual, family, household etc.); and (4) the unit of analysis (the incomes of the household or family population or all individuals, for example). If you are comparing real income/expenditure levels across regions or years, then you also need to choose an appropriate price index to put all values into comparable constant-price terms.

To summarize the distribution of the living standards (economic well-being/welfare) in a low-income country, one would typically look at the distribution of household expenditure (where the household aggregate is equivalized) among the population of individuals.

As I said, please do some reading on the relevant topics before posting! For issues such as the above, look at something like Angus Deaton's (1997) Analysis of Household Surveys. It's available as a free download from (I think) the World Bank's website.