Uncertainty and inequality: a relationship between entropy and income distribution in society

Tamara Merkulova, Artem Yantsevich

Abstract


The paper is aimed to discussing features of a relationship between income inequality and entropy.

The analyses is based on the theoretical thesis that income inequality is a factor of uncertainty and instability in society, chaotic behaviour of social-economic system, and it is accompanied with entropy increase. Theil index and Gini coefficient are used as income inequality measures in the analyses,Shannonentropy is chosen as entropy measure.

The relationship between income inequality measures and entropy measures, including entropy based on income distribution and entropy based on people distribution are discussed. It is noted that changes of entropy and Gini coefficient can have unlike signs: entropy can increase with both inequality increase and inequality decrease. Entropy maximum takes place for Lorenz curve with Gini coefficient 1/3, a deviation from it leads to entropy decrease. This is illustrated by power-series distribution.

The analyses give arguments to conclude the following. If majority of population is located in low-income clusters, inequality increasing can lead to decreasing of uncertainty and rising of controllability of social-economic system. If a government starts an implementing a politic aimed to inequality decreasing, in the beginning it will meet uncertainty and chaos rising. It can be suggested that nonlinear change of entropy accompanying changes in income distribution is a factor which slows dawn a further progress in this direction and blocks economic reforms in developing countries.

Key words: entropy, income distribution, Theil index, Gini coefficient

Keywords


entropy; income distribution; Theil index; Gini coefficient

Full Text:

PDF (Russian)

References


??????, ?.?., ??????, ?.?. 2004. ???????? ? ?? ???? ? ?????. ??????????? ??????????????? ??????, ?.8, ?1, ?. 70-79.

?????????, ?. 1967. ???????? ? ?????????? ??????? ????????. ?.: ?????, 283 ?.

??????????, ?.?. 2005. ????? ????????????? ??????????-??????????????? ??????? ??? ?????????????? ?????????. ???????? ?????????? ???????? ?????? ?????????? ???????? ????. ?.7, ?1, ?. 242-247.

???????, ?.??. 1978. ??????????? ?????? ????????????? ??????? ??????. ???. ? ????. ?.: ?????, 248 ?.

???????????, ?.?. 2002. ???????? ? ?????? ???????? ??????.

?.: ????-?, 284 ?.

?????????, ?.?. 2007. ?????????????? ?????? ???????????????? ??????. ???????, ??? ??. ????????, 388 ?.

???????, ?.?., ??????, ?.?., ?????, ?.?. 2013. ?????????? ???????? ??? ????????????? ????????? ???????? ??????? ? ?????????. ??????????. ???????????, ???????????? ??????, 148 ?.

???????, ?. 2002. ???????????? ????????????????? ????????? ??????? ???????????? ???????. ??? ??????, ? 3, ?.171-184.

????????, ?.?., ????????, ?.?. 2009. ??????????? ?????? ??? ????? ?????????????? ?????? ???????? (??????????) ?????????? ????? [?????]: ??????? ???????. ?????., ? 2, ?. 52-64.

????????, ?.?., ?????????, ?.?., ?????????, ?.?., ???????, ?.?. 2005. ?????????????-??????????? ?????? ? ??????? ???????-????????????? ??????. ?????? ??? ??. ?.????, ? 5 (87), c.265-272.

???????????, ?.?., ???????????, ?.?. 2007. ???????? ? ???????????. ?????????????? ? ???????????? ??????. ?.-??????: ???, 280 ?.

?????????, ?.?., ??????, ?.?., ????????, ?.?., ???????, ?.?. 2010. ???????????? ?? ???????????? ?????? ??????????? ?????????? ?? ??????????? ????????????? ??????????? ??????. ??????????. ???????: ?????-???????, 287 ?.

????????, ?.?., ??????, ?.?. 2013. ???????????? ???????? ???????? ??? ?????? ?????????? ??????????? ??????. ???????????? ?????????? ?? ??????????? ? ?????????: ?? ????? ?? ???????????????????: ?????????? ?? ???. ?.?.-?.?., ????. ????????? ?.?. ???????: ?????-???????, ???????? ?????? ?.?.

Kuznets, S. 1955. Economic Growth and Income Inequality. American Economic Review, Vol. 45, No 1, ?p. 1-28.

Milanovic, B. 1994.Determinants of Cross-Country Income Inequality: An Augmented Kuznets Hypothesis. World Bank Policy Research Working Paper 1246, World Bank, Washington, D.C.

Ravallion, M., Lyn, S., Michael, B. 1996. Equity and Growth in Developing Countries: Old and New Perspectives on the Policy Issues. Policy Research Working Paper 1563, World Bank, Washington, D.C., January

Deininger, K., Lyn, S. 1996. A New Data Set Measuring Income Inequality. World Bank Economic Review, September. ? 10 (3), ??. 565591.

Adams, Richard H. 2002. Economic Growth, Inequality, and Poverty Findings from a New Data Set // World Bank Policy Research Working Paper. February ? 2972. ????? ???????: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=636334. ????. ? ??????.

Bigsten, A., Levin, J. 2001. Growth, Income Distribution, and Poverty: A Review. WIDER Discussion Paper 129, World Institute for Development Economics research (WIDER), Helsinki, November.

Shannon, C. E. 1948. A Mathematical Theory of Communication. C. E. Shannon. Bell System Technical Journal, V. 27, No. 3, No. 4.

Theil, H. 1967. Economics and information theory. Amsterdam: North-Holland, 488 p.

Cowell, F., 1977. Measuring Inequality. Philip Allan, Oxford, UK.


Refbacks

  • There are currently no refbacks.

Comments on this article

View all comments


Copyright (c) 2014 Tamara Merkulova, Artem Yantsevich

Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Creative Commons License


Economic Cybernetics. International scientific journal is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Permissions beyond the scope of this license may be available at http://ec.projects-manager.com.

Economic Cyberneticsis published by Vasyl' Stus Donetsk National University.

Follow me on Academia.edu