ABSTRACT
Changes in income inequality are typically measured by calculating changes in income distribution, either with measures of income dispersion, such as the Gini coefficient, or with measurements of income shares, e.g., the overall income share of the top 1%. This chapter argues that although measures of income distribution likely tell us something about income inequality, changes based on existing distribution measures do not reveal much about changes in underlying economic inequality. Income mobility studies can be helpful in understanding how economic inequality changes over time, but an approach that combines absolute and relative mobility measures is required. The best measure of inequality measures may be found in studies of consumption inequality.
