We introduce an extension of the Esteban and Ray [Econometrica, 62:819–851 1994] measure of polarization that can be applied to density functions. As a by-product we also derive the Wolfson [Am. Econ. Rev., 84:353–358 1994] measure as a special case. This derivation has the virtue of casting both measures in the context of a (statistically) unified framework. We study the polarization of the distribution of household income for five OECD countries (LIS database): US, UK, Canada, Germany and Sweden.
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The present paper is essentially based on Esteban, Gradín and Ray , published as #218 in the working papers series of the Luxembourg Income Study. Changes have been kept to a minimum. We have provided a brief reference to the literature on polarization measurement that has appeared since then and have updated the data of our application.
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Esteban, J., Gradín, C. & Ray, D. An Extension of a Measure of Polarization, with an application to the income distribution of five OECD countries. J Econ Inequal 5, 1–19 (2007). https://doi.org/10.1007/s10888-006-9032-x
- income distribution