PROBLEMS IN MEASURING INEQUALITY

Although data on the income distribution and the poverty rate help to give us some idea about the degree of inequality in our society, interpreting these data is not always straightforward The data are based on households’ annual incomes. What people care about, however, is not their incomes but their ability to maintain a good standard of living. For at least three reasons, data on the income distribution and the poverty rate give an incomplete picture of inequality in living standards.

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