For some countries the assessment of inequality in the income dimension is based on household consumption, and for others it is based on income distribution. Are these inequalities comparable?
By their very nature, income and consumption yield different levels of inequalities, with income inequality being higher than inequality in consumption. Income seems to correspond more naturally to the notion of “command over resources.” Consumption data are arguably more accurate in developing countries, less skewed by high values, and directly reflect the conversion of resources. Income data also pose technical challenges because of the greater presence of zero and negative values. In an ideal world, one would be consistent in the use of either income or consumption data to estimate inequality. However, to obtain sufficient country coverage, it is necessary to use both. The final estimates are modestly influenced by whether inequality refers to income or consumption distribution.