Income Inequality in Pakistan: An Analysis of Existing Evidence

To study the consequences of an economic change on income distribution we rank distributions of income at different points in time and quantify the degree of income inequalities. Changes in income distribution can be ascertained either through drawing the Lorenz curves or through estimating different inequality indices, such as Gini Coefficient, coefficient of variation, standard deviation of logs of in• comes, Theil’s Index and Atkinson’s Index. Ranking the distributions of income through Lorenz curves is, of course, possible only as long as they do not intersect. Moreover, when Lorenz curves do not intersect each other, all inequality measures rank income distributions uniformly. However, if the Lorenz curves do intersect each other. different inequality measures may rank income distributions differently and thus the direction of change cannot be determined unambiguously. For this reason , the use of a single measure would be misleading. Accordingly , the use of a ‘package’ of inequality measures becomes essential.