Inequality Impact

Overview

The inequality impact metrics provide insights into how a policy reform affects income distribution. These metrics are part of the EconomicImpact class and include measures of income inequality and concentration of income among the top earners.

Available Metrics

  1. inequality/gini: Calculates the Gini coefficient, which measures income inequality.

  2. inequality/top_1_pct_share: Calculates the income share of the top 1% of earners.

  3. inequality/top_10_pct_share: Calculates the income share of the top 10% of earners.

Metric Structure

Each metric returns a dictionary with the following keys:

  • baseline: The metric value before the reform.

  • reform: The metric value after the reform.

  • change: The absolute change in the metric value due to the reform.

  • change_percentage: The percentage change in the metric value due to the reform (only for Gini coefficient and top 1% share).

All values are rounded to 2 decimal places for baseline, reform, change, and change percentage.

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": 0.25}},
    country="uk"
)

# Calculate Gini coefficient impact
gini_impact = impact.calculate("inequality/gini")

# Calculate top 1% income share impact
top_1_pct_share = impact.calculate("inequality/top_1_pct_share")

# Calculate top 10% income share impact
top_10_pct_share = impact.calculate("inequality/top_10_pct_share")

# Print the results
print(f"Gini coefficient impact: {gini_impact}")
print(f"Top 1% income share impact: {top_1_pct_share}")
print(f"Top 10% income share impact: {top_10_pct_share}")

Output

Gini coefficient impact: {'baseline': 0.43, 'reform': 0.43, 'change': -0.00, 'change_percentage': -0.39}
Top 1% income share impact: {'baseline': 0.09, 'reform': 0.09, 'change': 0.00, 'change_percentage': 1.96}
Top 10% income share impact: {'baseline': 0.31, 'reform': 0.31, 'change': 0.00, 'change_percentage': 0.64}

Interpretation

In this example:

  • The Gini coefficient decreases slightly from 0.43 to 0.43, indicating a small reduction in income inequality.

  • The income share of the top 1% increases from 9.12% to 9.30%, reflecting a slight rise in concentration among the highest earners.

  • The income share of the top 10% increases from 31.02% to 31.21%, showing a minor rise in the share of income held by the top 10% of earners.