Palma and Galbraith on Inequality

The Washington Post had a story (h/t Esteban Perez) recently about the ratio of inequality between the 10% richest and the 40% poorest, which they suggest is named the Palma ratio, after Chilean economist Gabriel Palma (see figure below).
 The figure suggests that the US is very unequal more so than some African countries and several in Asia, including, for example India. As expected Latin America is very unequal.

Note, however, that if one looks at the World Bank data (figure below), with the Gini coefficient criticized in the article, one also finds that the US is more unequal than India and is close to some African countries levels of inequality.

Yet, as noted by Jamie Galbraith long ago (see here), using the Theil index instead, and more importantly data on manufacturing wage inequality, a different picture emerges (see figure below).

In this case,as the authors say: "Higher inequalities are seen in Latin America, Africa, Russia, and South Asia, with the highest in a broad equatorial belt." And, in all fairness, this seems more likely.


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