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‘Williamson’s Fallacy’ in Estimation of Inter-Regional Inequality

Gluschenko, Konstantin (2015): ‘Williamson’s Fallacy’ in Estimation of Inter-Regional Inequality.

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Abstract

When estimating regional inequality, many economists use inequality indices weighted by the regions’ shares in the national population. Although this approach is widespread, its adequacy has not received attention in the regional science literature. This paper proves that such approach is conceptually inconsistent, yielding an estimate of interpersonal inequality among the whole population of the country rather than an estimate of regional inequality. Nevertheless, as a measure of interpersonal inequality, such an estimate is very rough (up to misleading) and does not always have an intuitive interpretation. Moreover, the population-weighted inequality indices do not meet the requirements for an adequate inequality measure.

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