The Palma ratio of inequality was proposed by Alex Cobham and Andy Sumner in 2013, on the basis of the Palma proposition: an observation by Jose Gabriel Palma that currently changes in income or consumption inequality are almost exclusively due to changes in the share of the richest 10 per cent and poorest 40 per cent, because the ‘middle’ group between the richest and poorest always capture approximately 50 per cent of gross national income. The measure is now reported by many of the leading income distribution databases and some national statistics offices, and received wide support as an indicator for the UN Sustainable Development Goal 10.
Below is an introduction to the Palma, including a 2-minute animation. You can links to a range of datasets, along with the latest research and policy papers about and/or using the Palma, by clicking through to Palma resources.
A complete distribution – of inequality, or anything else – cannot be captured in a single measure. And as Tony Atkinson observed in the 1970s, any single measure that is used must inevitably reflect a normative view about what aspects of the distribution are more important.
For example: the Gini coefficient, the most commonly used measure of inequality, is known to be insensitive to the tails of the distribution, and insensitive at high levels of inequality – precisely when and where we might care most.
We don’t want to replace the tyranny of the Gini with a tyranny of the Palma, but instead to challenge the casual use of the Gini that results in important features of inequality being hidden. Let’s use multiple measures of the distribution; but if you’re going to use just one, please don’t let it be the Gini.