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Faculty of Economics

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Palma, J. G.

Has the income share of the middle and upper-middle been stable over time, or is its current homogeneity across the world the outcome of a process of convergence? The 'Palma Ratio' revisited

CWPE1437

Abstract: In an article published in this journal in 2011, an alternative measure of inequality was suggested, which has subsequently become known as ‘the Palma Ratio’. In this new article, the author of the original proposal revisits the argument for such a measure. Using new data, he examines whether the current remarkable homogeneity in the income share of the middle and upper‐middle around the world — the foundation of the so‐called ‘Palma Ratio’ — is an historically stable stylized fact, or whether it is a new phenomenon, the outcome of a process of convergence towards the current ‘50/50 Rule’ (in which half of the population in each country located within deciles 5 to 9 tends to appropriate about 50 per cent of the national income, or just above). Although partly written in response to a comment on the 2011 paper (published in this issue), the article also makes a substantive further contribution to the literature on inequality and the statistics to measure it.

Keywords: income distribution, inequality, 'Palma Ratio', homogeneous middle and upper- middle, convergence, institutional persistence, ideology, neo-liberalism, 'new left', Latin America, Africa, Brazil, Chile, South Africa, United States

JEL Codes: D31 E11 E22 E24 E25 I32 J31 N16 N30 N36 O50 P16

Author links: Jose Gabriel Palma  

PDF: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1437.pdf

Open Access Link: https://doi.org/10.17863/CAM.5840