People’s Evaluations of Income Inequality and the Gini Coefficient: Different in Details, Similar in Patterns

Recent studies suggest that the Gini coefficient’s and people’s evaluations of income inequality differ. Thus, we risk adopting policies that decrease the coefficient but not the inequality people see. This article argues that the coefficient does reflect people’s perception of inequality, at least in relation to the criticised Pigou-Dalton Transfer Principle stating that inequality falls whenever a person with higher income gives a small part of it to a person with lower income. Results from a questionnaire experiment where 105 WUT students evaluated inequality of different income distributions confirm that answers strictly following the principle are rare (around 3% of the sample). However, the average correlation between respondents’ and Gini’s evaluations was relatively high (0.693). Furthermore, when respondents’ evaluations were averaged, the correlation jumped to 0.954. An MDS analysis confirms that while these evaluations differed in details, the pattern common to respondents’ evaluations was in line with the Gini coefficient.