An axiomatic characterization of the Theil measure of income inequality |
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Authors: | James E Foster |
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Affiliation: | 1. Department of Economics, Cornell University, Ithaca, New York 14853, USA;2. Krannert School of Management, Purdue University, West Lafayette, Indiana 47907 USA |
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Abstract: | This paper provides a characterization of a frequently used measure of income inequality. It has been known for some time that the Theil measure of income inequality (1) is consistent with the Lorenz criterion, when it applies, and (2) exhibits a simple and empricically useful decomposition by population subgroup into within-group and between-group terms. The major theorem establishes the converse: the decomposability property defines the Theil measure uniquely (up to a positive multiple) among all Lorenz-consistent measures. |
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