Many development experts
now use the Palma ratio as a measurement of inequality. The ratio is named
after Gabriel
Palma who showed that in most countries the 50% of the population
corresponding to the middle and upper-middle income groups (deciles 5
to 9 of a country's income distribution) tend to appropriate as a group
about half the national income - approximately 50%. Therefore, the huge
disparities across the world in terms of income distribution is almost
exclusively a result of what happens to the top 10% and the bottom 40%
of the population. In this context, Palma suggests that the ratio of the
share of income appropriated by the top 10% to that of the bottom 40%
may be a more meaningful and transparent indicator of inequality. In a
recent article, The
Washington Post explains the usefulness of the Palma ratio.