Gini and Zenga Indices AVAILABLE for the Analysis of Contextual Income

Inequalities within Canada

Bradley A. Corbett, PhDAssociate Research Professor

Richard Ivey School of BusinessUniversity of Western Ontario

Our TeamBradley A. Corbett

Richard Ivey School of Business, University of Western Ontario,London, Ontario, Canada

Francesca GreselinDipartimento di Metodi Quantitativi per le Scienze Economiche e Aziendali,

Universit_a di Milano Bicocca, Milan, ItalyLeo Pasquazzi

Dipartimento di Metodi Quantitativi per le Scienze Economiche e Aziendali,Universit_a di Milano Bicocca, Milan, Italy

Rebecca WilliamsUniversity of Western Ontario,

London, Ontario, CanadaRicardas Zitikis

Department of Statistical and Actuarial Sciences, University of Western Ontario,London, Ontario, Canada

…a measure of income distribution in a society.

The study of Income Inequality is…

Gini Coefficient

• Based on Lorenz curve• Defined as A/(A+B)• When A=0, Gini=0;

represents perfect equality• When B=0, Gini=1;

represents perfect inequality

• Uses ratio of lower incomes to overall mean of the population

Global Changes in the Labour Market, Incomes and the Canadian Context

OECD (2011)• Income inequality is on the rise in nearly all member countries• High earner incomes are increasing twice as fast as low earner

incomes– Loss of middle class jobs such as manufacturing in developed

countries– Shift from an industrial to a service economy

• Increase in technical jobs (higher associated incomes)• Increase in sercvice jobs (lower associated incomes)

– Higher education no longer guarantees the prospect of a ‘better life’ but the ‘right education’ is now important

Some additional mitigating factors in Canada– Poverty among aboriginal peoples– Exploitation of natural resources in some provinces

Changes in the Tails of the Income Distribution

Frenette, Green & Milligan (2007)• Study of income inequality in Canada from 1980-2000• Argued existing [survey] data sources may have missed

changes in the tails of the income distribution• Demonstrated that the Census was a better data source than

the standard Survey of Labour and Income dynamics• Also argued many of the changes in the distribution of income

have occurred in the tails of the distribution over time• Changes in the tails may not be adequately detected by the

Gini Index if the mean remains stable while the tails grow fat

Scatter Plot of Canadian Census Divisions: Gini vs. Zenga

Gini Index Quintiles in Canada: 2006 Census, After Tax, Census Families

Gini and Zenga Indices Available

• 2006 Canadian Census (2005 Incomes)– a 20% sample from the 2006 Census (~6 Million)– Household incomes– Incentive for low income to submit tax (2000)– Missing data supplemented by tax data– Sampling Weights based on Census

• Provincial and Census Division levels of analysis• Income includes market income + government

transfers• One family member per household selected

Gini and Zenga Indices are AVAILABLE for Merging: Provincial and Census Divisions in Canada

(2006 Census; Provincial shown below)

Economic Families Census Families

No Adjustments Adjusted No Adjustments

GINI Before Tax After Tax Before Tax After Tax Before Tax After Tax

BC 0.45481 0.42086 0.41603 0.37584 0.46636 0.43117

Alberta 0.47456 0.43898 0.43568 0.39430 0.48730 0.45117

Saskatchewan 0.44137 0.40688 0.40275 0.35478 0.45575 0.42123

Manitoba 0.43836 0.40314 0.39709 0.36183 0.45347 0.41783

Ontario 0.45483 0.41539 0.41592 0.37004 0.46837 0.42783

Quebec 0.43504 0.39750 0.38983 0.34236 0.44338 0.40523

New Brunswick 0.41026 0.37520 0.36600 0.32483 0.41904 0.38304

Nova Scotia 0.42159 0.38550 0.37850 0.33618 0.43059 0.39351

PEI 0.39318 0.36127 0.34777 0.30838 0.40098 0.36821

Newfoundland & Labrador 0.42057 0.37953 0.38094 0.33326 0.43297 0.39080

Contact Info:

Bradley A. Corbett, PhDRichard Ivey School of BusinessUniversity of Western Ontario

519-850-2971bcorbet@uwo.ca