On the interpretation of a concentration index of inequality

Abstract

This paper aims to add a more intuitive understanding to the concept of a concentration index for measuring relative inequality with an application of health-related measures by income. A new redistribution interpretation and an existing redistribution interpretation of the Gini are presented and applied to the concentration index. Both indicate the share of the total amount of any variable that needs redistributing in a particular way from rich to poor (or vice versa) to achieve a concentration index equal to zero. The characteristics of these redistribution schemes are compared. The paper also draws attention to the relationship between a concentration index, a correlation coefficient with relative income rank and a coefficient of variation of the variable of interest. These relationships are illustrated using data on inequality in dental care utilisation in European countries taken from the European Community Household Panel survey.