First estimates of inequality benchmark incomes for a range of countries

Abstract

It is known that virtually all inequality measures imply the existence of a ‘benchmark income’, above which adding incremental income increases inequality, and below which it decreases inequality. Benchmark incomes can be interpreted as social reference levels that identify the richest individual for whom it would be just to subsidize their income. Despite the intuitive appeal of benchmark incomes, there have been hardly any empirical applications to date. This paper provides the first estimates of benchmark incomes for a range of contrasting countries and different inequality measures. All benchmark incomes lie far above official national poverty lines. The results suggest that economic growth together with falling inequality need not necessarily be poverty reducing.