Income inequality and income segregation can be studied through various segmentations. These are based on the concept of net worth. Segmented income distributions can be studied on the basis of age, education, occupation, geographic location, commuting time, marital status, and the like. Such segmentation of income inequality also form the basis for examining income inequality and income volatility.
A common method used in studying the relation between income inequality and economic volatility is the net worth-income ratio. The net worth-income ratio looks at the difference between total assets held by households as a proportion of total income earned by them. This ratio provides the notion of equity. A positive value indicates that the households have higher wealth as compared to other households. A negative value indicates that the households have lower wealth as compared to other households.
Based on information provided by the International Comparison Survey, there are several income distribution databases across countries. Among these databases, two popular ones are the Purchasing Managers Income Distribution Database (PMID) and the Consumer Price Index (CPI) for all countries over time. Using these two databases, researchers can get detailed information on changes in household income inequality across countries. This helps them understand the nature of income inequality at the national level.
Over the years, income distribution around the world has become more unequal. This trend has been accelerated by the rapid growth of emerging economies in Asia, which have widened the income gap at the same time. Asia’s two fastest-growing economies, China and India, have also exacerbated the regional income divide, with the poor purchasing power of the middle class growing at twice the rate of the wealthier group. To address this problem, the Asian countries have introduced various policies, such as subsidies, tax cuts, and remittance schemes to increase income for the poor and strengthen the middle class.
In addition, researchers can compare income inequality at the national level using the Gini index. The Gini index is based on the income shares of the poor and wealthy deciles. By simply referencing the current income distribution statistics for each country, researchers can quickly and conveniently see how income levels have changed over time. The United States, for instance, has a very high level of income inequality, with the top income group enjoying the highest share of the overall income while the poorest decile is also experiencing high levels of income poverty.
Researchers can also analyze country-wide trends using the commonly used measures of income inequality, such as the Gini Coefficient and the Purchasing Managers Index. These two widely used measures rely on a common format that involves the calculation of the deviation from a perfect two-period comparison. In this case, the research sample is considered as a normal interval rather than a sample of log-linear data. The deviation, or deviation rate, from the mean is used as a way of comparing changes in the mean value between period t and period q. This makes it easier to see the consistency of period sizes across countries, especially when researchers compare countries at different income levels.
Some researchers use logistic regression to estimate parameters of change over time. This type of estimation requires the researcher to estimate parameters of period t, population size, and growth rates, and then evaluate how those parameter values change with time. For an example of logistic regression, the inputs to the model are the actual values of income inequality over time, the effect of any existing gaps in income, and the response of the distribution to various policy changes. This method is commonly used in the evaluation of the effects of minimum wage laws on employment.
Although it may seem complicated, income inequality can be examined at many different scales. Using data from the Panel Study of Income Dynamics, researchers have been able to show the effects of increasing family income, the extent of gender gaps in earnings, and the extent to which the distribution of wealth varies by educational attainment. By combining a number of estimates of income distributions, researchers have shown the existence and severity of income disparity at the national level, as well as the variation in income distributions within regions of the country. Researchers even find that the largest differences in income concentrations occur between the states with the highest and lowest levels of local taxation.