Generalized entropy measures of mobility for different sexes and income levels

Abstract

A family of mobility measures is investigated using the Michigan panel data on income dynamics, These measures are decomposed in order to learn about components that are due to differences in gender and income groups, on the one hand, and within-group components which are free of such group characteristics. These measures compute the degree of equalization over time of the distribution of ‘permanent incomes’. Permanent or average income of an individual is computed over an increasing number of points within a time interval of interest. This degree of equality is compared (as a ratio) to the equality of incomes at any reference point of interest in order to give us a measure of stability in the size distribution of incomes. We take an average of inequality values over the time interval as our reference value for ‘short-run’ inequality. Mobility is greater the greater this degree of relative equalization. Several aggregator functions have been used to compute the ‘permanent income’ variable. Their justification and role in robustifying our inferences is briefly discussed. The mobility profiles here suggest that there has not been much equalization between different sexes, but there is not a lot of inequality between these groups in our sample. Most of the inequality is within groups where the annual distributional changes belie the relative stability of the permanent income distribution.