Atkinson Index
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In economics, the Atkinson index or Atkinson measure is used to quantify income inequality. The distinguishing feature of the Atkinson index in economics is its ability to gauge movements in different segments of the income distribution.
Researchers can place greater weight on changes in a given portion of the income distribution by setting the e parameter (referred to as the level of "inequality aversion"). The Atkinson index's functional form is:
- ATKINSON = 1 − (n / 1)[Ε[(Xi / u)1 − e]1 / (1 − e),
where Xi is the weighted income of individual i and 1 is the mean income of the selected population. The e parameter, which is bound by the limits of 0 and 1, determines the level of inequality aversion.
The Atkinson index becomes more sensitive to changes at the lower end of the income distribution as e approaches its limit of 1. Conversely, as the level of inequality aversion falls (that is, as e approaches 0) the Atkinson becomes more sensitive to changes in the upper end of the income distribution.
[edit] References
- Paul D. Allison, Measures of Inequality, American Sociological Review, 43 (December 1978), pp. 865-880, presents a technical discussion of the Atkinson measure's properties.
- Income Inequality, 1947-1998, from the United States Census Office.
