Income Inequality
Income inequality has its own ecosystem of indicators — Gini, top-10% share, Palma ratio, decile ratios — and the same country can look reassuring on one and alarming on another. This page explains what the headline measures actually capture and how to read them together.
Last reviewed on 2026-04-27.
How inequality is measured
The Gini coefficient
The Gini coefficient compresses an entire income distribution into one number between 0 and 1 (sometimes shown as a percentage from 0 to 100). A Gini of 0 would mean every person has identical income; a Gini of 1 would mean a single person holds all of it. In practice, country-level Ginis cluster between roughly 0.25 in the most equal Nordic economies and 0.60 in the most unequal Southern African ones, with most middle-income countries between 0.30 and 0.45. Because the Gini is a single number, it is convenient for international tables — but it is also blunt. Two countries can share the same Gini while having very different problems: one might have a thin wealthy elite pulling away from a flat middle, the other might have a deep poverty tail dragging down an otherwise broad middle.
Top-decile and top-percentile shares
The share of national income captured by the top 10% — and increasingly the top 1% and top 0.1% — has become the dominant lens in inequality research over the last two decades, partly because it can be reconstructed from tax records that survey-based Ginis tend to underestimate. Top shares speak directly to where the wealth is going: an economy where the top decile takes 30% of income looks very different from one where it takes 55%. Top shares also pick up changes that the Gini may smooth over, especially at the very top of the distribution. Note that top shares depend heavily on whether the figure is pre-tax (market income) or post-tax-and-transfer (disposable income); the difference in some welfare states is large.
The Palma ratio
The Palma ratio divides the income share of the top 10% by the income share of the bottom 40%. It rests on a regularity in international data: most variation in Gini is driven by what happens at the top and the bottom, while the middle 50% tends to capture a relatively stable slice of national income. By stripping out the middle, the Palma highlights the part of the distribution that actually moves. A Palma close to 1 means the top decile and the bottom four deciles share roughly the same total; values above 2 indicate the top decile takes more than twice as much as the bottom 40% combined. The Palma is easier to explain to non-specialists than a Gini and harder to game with technical adjustments.
Percentile ratios
The P90/P10 ratio compares the income at the top of the 90th percentile to the income at the bottom of the 10th percentile. The P90/P50 ratio compares high earners to the median; P50/P10 compares the median to the poor. Together, these “upper-half” and “lower-half” ratios decompose the question of where inequality is concentrated. A country can have a flat upper half and a wide lower half — meaning poverty is its main inequality problem, not runaway top incomes — or vice versa. This decomposition is one reason that inequality reports rarely rest on a single number.
Reading inequality data carefully
Pre-tax versus post-tax
The most consequential choice in any inequality table is whether the figures are pre-tax market income or post-tax-and-transfer disposable income. In a country with progressive taxes, generous transfers, and strong public services, the post-tax Gini can be ten Gini points lower than the pre-tax one. Comparing a market-income figure for one country to a disposable-income figure for another is one of the most common mistakes in casual inequality discussion. World Bank and OECD figures usually specify the concept clearly; treat any figure that does not as suspect.
Income, consumption and wealth
Surveys in low- and middle-income countries often measure consumption rather than income, because consumption is easier to capture for households outside the formal sector. Consumption distributions are usually flatter than income distributions because households save and dis-save to smooth consumption over time. Wealth inequality — the distribution of net assets — is almost always more skewed than income inequality, because wealth accumulates the residual of decades of unequal income. A country can have a moderate income Gini and a wealth Gini close to 0.8 in the same year.
Surveys versus tax records
Household surveys miss top earners (rich households are harder to reach and respond less honestly) and miss capital income. Tax-record studies miss informal-sector workers and the very poor. The two methods often disagree about top-decile shares by several percentage points. The World Inequality Database tries to combine them by reconciling national accounts, surveys and tax data — its figures usually fall between the two extremes.
Within-country versus between-country
Global inequality has two pieces. Between-country inequality — the gap between rich and poor nations — has narrowed since the late 1990s as China, India and other large economies have grown faster than rich-world averages. Within-country inequality has, on average, drifted upward in many advanced economies and is high in much of Latin America and Southern Africa. Discussions that mix these two pieces tend to talk past each other.
Common mistakes when reading inequality charts
Comparing Ginis across data vintages
Inequality estimates are revised when sampling frames, weighting, or income definitions change. A 2-point shift in a country’s Gini between two reports is often a methodology change, not a real social shift. Always check whether the series you are comparing was constructed on the same basis.
Treating equal-Gini countries as equal
Two countries with the same Gini can have radically different distributions. Pair the Gini with the top-10% share or the Palma to see which part of the distribution is doing the work. Reports that show only one number per country are easy to read but easy to misread.
Ignoring transfers and public services
Cash income misses the value of public health, education and housing supports that mainly accrue to lower-income households. Some inequality measures — extended income concepts — try to add these in; most headline figures do not. A country with a high market Gini and strong public services is materially less unequal than its headline number suggests.
Confusing inequality with poverty
Inequality is about distribution; poverty is about a threshold. A country can reduce inequality by stagnating the top while leaving the poor unchanged, or reduce poverty without changing inequality at all. The two are linked but not the same — the extreme poverty page covers the threshold-based view.
Where the data comes from
The standard reference series for international comparisons are the World Bank’s Poverty and Inequality Platform (PIP), the OECD Income Distribution Database for OECD members, the Luxembourg Income Study (LIS) for harmonized microdata, and the World Inequality Database (WID) for the long-run top-share series built from tax records. National statistical offices publish their own series, which are sometimes more accurate but harder to compare across countries.
Each source documents its income concept (market, gross, disposable), its unit (individual, household, equivalised household), and the year of the underlying survey. When in doubt, follow the source link on a chart back to the publisher and read those notes; small definitional differences can drive most of an apparent “trend.”