Income Inequality — Definition

Definition

Income inequality describes how income over a specified period is distributed across people or households. It differs from consumption inequality and from wealth concentration. Income is a flow, consumption concerns resources used for current living, and wealth is a stock.

Comparisons need a common variable, population unit, period and method. A mean can rise without a gain for the middle or lower part of a distribution, while poverty can fall without a change in relative inequality.

Several measures are therefore needed to understand what a particular distributional claim establishes.