Measures of Income Inequality are Biased or Misinterpreted

Abstract

Considering various measures of personal income and the evolution of the household size distribution we reveal major quantitative inconsistencies in the definition of household inequality. The changing composition of households in the U.S. is the only effect causing the observed increase in Gini coefficient since 1967. When corrected for the actual decrease in the average household size the relevant Gini returns to that of personal incomes. The latter has been hovering in a very narrow range between 0.50 and 0.51 since 1974.