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Abstract:
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The increase in income inequality, due to a shift in favor of the upper end in the United States and other countries, has become a public policy concern. This paper shows that the Gini index, G, underestimates the rate of increase in inequality because a shift of income towards the top incomes increases both the numerator and denominator of G. A modified index (G2), which replaces the mean in the denominator by the median, indicates that income inequality in the United States grew at about twice the rate as the Gini index from 1967 to 2016. The modified Theil index of inequality also grew at a faster rate during the period.
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