How do mean division shares affect growth and development

The Gini coefficient is widely used in academia to discuss how income inequality affects development and growth. However, different Lorenz curves may provide different development and growth outcomes while still leading to the same Gini coefficient. This paper studies the development effects of “mean division shares”, i.e., the share of income (mean income share) held by people whose household disposable income per capita is below the mean income and the share of the population (mean population share) with this income, using panel data. Our analysis explores how this income share and population share impact development and growth. It shows that the income and population shares affect growth in significantly different ways and that an analysis of these metrics provides substantial value compared to that of the Gini coefficient.

Abstract licence: CC BY

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