A New Income Inequality Index Based on the Ratio of Medians

Articles in Press

Document Type : Original Article

Author

Assistant Professor, Department of Statistics, Faculty of Basic Sciences, Payam Noor University, Tehran, Iran

10.22075/jem.2025.38603.2030

Abstract

This study presents a new index for measuring income inequality based on the ratio of the median income of low-income to high-income groups. Given the common challenges in income data, including the presence of outliers and asymmetric distributions, conventional mean-based indices often do not provide appropriate estimates. In contrast, the proposed index, by utilizing the median—a measure robust to outliers—mitigates this challenge.  By precisely defining the new index and introducing the related “inequality curve,” the present study examines the basic features of a valid inequality measure and provides a consistent estimator for it. The performance of the index has been evaluated through simulation studies and application to Iranian household income data. The findings indicate that the proposed index is not only a valid measure for measuring inequality, but also provides a more expressive and practical understanding of the Lorenz curve through the related curve.

Keywords

Journal of Econometric Modelling

Articles in Press, Accepted Manuscript
Available Online from 08 November 2025

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