Income Distribution by Average

Overview

The income distribution by average metrics provide insights into how a policy reform affects the average income across different income deciles. These metrics are part of the EconomicImpact class and measure the average change in household net income due to the reform.

Available Metrics

  1. distributional/by_income/average: Calculates the average change in household net income by income decile.

Metric Structure

Each metric returns a dictionary with the following keys:

  • average: A dictionary where the key is the income decile, and the value is the average change in income for that decile.

The values represent the change in income due to the policy reform, rounded to several decimal places.

Example Usage

from policyengine import EconomicImpact

# Initialize the EconomicImpact class with a reform
impact = EconomicImpact(reform={
  "gov.hmrc.income_tax.rates.uk[0].rate": {
    "2024-01-01.2100-12-31": 0.55
  }}, country="uk")

# Calculate average income change by income decile
average_income_change = impact.calculate("distributional/by_income/average")

# Print the result
print(f"Average income change: {average_income_change}")

Output

Average income change: {'average': {1: -1542.53, 2: -1982.53, 3: -4556.84, 4: -5370.20, 5: -7216.05, 6: -7591.30, 7: -9211.03, 8: -9648.62, 9: -11506.89, 10: -14378.30, 11: -13195.00}}

Interpretation

In this example:

  • The average income change is negative across all deciles, indicating a reduction in household net income due to the policy reform.

  • The change is most significant in the higher deciles, with the highest decrease observed in the top decile (11), at -13,195.00.

  • The impact is progressively less severe in lower deciles, with the smallest decrease observed in the lowest decile (1), at -1,542.53.

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