Japanese
Evaluation of income level by Gini index
-Does the average income indicate the living standard?-
Comparison of the income per person of each country in the world is made commonly in the US$ price according to the exchange rate.
However, this does not necessarily accompany with the relative level of living standard, so it is nscessary to evaluate it by purchasing power. Thus, comparison is often made by purchasing power parity.
Furthermore, there is a wealth disparity in each country and the extent of the disparity differs according to the country. Isn't it impossible to consider this situation and think of a general evaluation of income level?
For instance, the comparison of the average income of the lower income group will be possible. Here, I will use Gini index as a representative index.
The income distribution ( Lorenz curve ) can take various shapes even when Gini index is used. However, I will think of the shape which is symmetrical by the 45-degree line ( a diagonal heading downward ). I assume the lower income group which occupies A % of the entire people obtains ( 100-A ) % of the total income. In other words, the higher income group which occupies ( 100-A ) % of the entire people obtains A % of the total income. I will use the average income of the lower income group as a representative figure and make a comparison.(*1.)
In this case, when Gini index is g, the income level of the lower income group becomes ( 1-g )/( g+1 ) times as high as the whole average income level.(*2.)
According to the World Bank Statistics, Japanese income level per person is evaluated 35,620US$ by exchange rate. However, it falls to 27,080US$ by purchasing power parity. Moreover, Gini index is 0.249 and the lower income group gains 60.1% of the whole income level.
Therefore, the income level of the lower income group comes out at 16,283US$.
As for the United States, the whole income level is 34,100US$ and the figure does not vary by purchasing power parity. But Gini index is as high as 0.408 and the lower income group gains 42.0% and 14,338US$. This figure is less than Japanese one.
As for China, the whole income level is 840US$ and it goes up to 3,920US$ by purchasing power parity. But Gini index is 0.403 and the income level of the lower income group stays as low as at 1,668US$.
As for Hong Kong, the whole income level is 25,920US$ and by purchasing power parity, it is calculated at 25,590US$, which is as high as the whole income level. However, Gini index is 0.522, which is extremely high, so the income level of the lower income group comes out as low as at 8,037US$.
As for Russian Federation, the whole income level is 1,660US$ and it is calculated at 8,010US$ by purchasing power parity, but the income level of the lower income group comes out as low as at 2,768US$ because Gini index is high, 0.487.
( statistical data )
Note*1. Reason for bisecting the income group
Here, I assume a society consists of a minor higher income group and a major lower income group ( Pyramid type in a sense ). The living standard of the higher income group seems to be less influenced by the income fluctuation, so the income level of the lower income group will be a good index to know the country's practical living standard.
The lower income group includes a person who is ranked in the middle.
Anyway, when we think about average living standard of each country, we should consider not only average income level, but also wealth distribution type of each country. It will help us build up a vivid image of the living standard. For example, the income level per person of Hong Kong and that of Japan are almost the same by purchasing power parity, but to think that living standard of Hong Kong and that of Japan are the same is obviously difficult.
Note*2. How to calculate the income level of the lower income group
Concerning a squre with sides of 1
Outside area s'=1*(1-a)/2*2=1-a
Inside area S=1/2-(1-a)=a-1/2
Gini index g=S/(1/2)=2S=2a-1
a=(g+1)/2
Income level rate of the lower income group R=(1-a)/a=(1-(g+1)/2)/((g+1)/2)=(1-g)/(1+g)
(May.16,2003.)
(Translation: Yuko Maekawa, Sep.11,2003.)