In the September 1975 issue of this Review, Morton Paglin posits a new summary statistic, the Paglin-Gini, which he uses to measure and analyze the level and trend of income inequality in the United States. This measure intends to recognize only income differences among families unrelated to the observed age-income profile as contributing to meaningful income inequality. This is to be contrasted with the standard Lorenz-Gini, in which all differences in income among living units contribute to inequality. Paglin's measure indicates substantially less inequality in the United States than is indicated by the Lorenz-Gini. Moreover, Paglin-inequality falls considerably in the post-World War II period while other measures indicate very little change in inequality over this period. Paglin is addressing an important problem. For the postwar period when the age distribution, the length of time spent in school, and the propensity of the young and the old to form their own households have all changed rapidly, the trend in the conventional Gini coefficient has no obvious normative interpretation. However, it is often given one. Unfortunately, Paglin's proposed index of inequality does not meet its objective and, even if it did, its normative content would be no clearer than that of the standard measure. Indeed, no single indicator is sufficient to capture trends in normatively relevant inequality without further analysis. Like any other time-series, a time-series of inequality must be approached with a well-specified, multivariate model. After describing Paglin's procedure in the next section, we challenge his measure in Section II. In Section III, Paglin's interpretation of policy-relevant inequality is questioned, and in Section IV the implications of the Paglin-Gini for the equity of the transfer system are analyzed. Section V is a summary of our critique.

Sheldon Danziger, Jacques van der Gaag, Michael K. Taussig, Eugene Smolensky, The Direct Measurement of Welfare Levels: How Much Does it Cost to Make Ends Meet?, The Review of Economics and Statistics, Vol. 66, No. 3 (Aug., 1984), pp. 500-505

This paper formulates and estimates a model of the determinants of female household headship. Headship responds to variations in the levels of well-being a woman can expect if she marries or if she heads her own household. We measure the opportunity cost of female headship and the effects of welfare benefits and women's work in the market on female headship and poverty. We find that if welfare benefits were reduced, there would be small reductions in the proportion of women heading households for whites and nonwhites, but a substantial increase in poverty for nonwhites. We also find that wives' work in the market reduces poverty and female headship for nonwhites, and reduces poverty, but increases headship for whites.

Using data recently collected by the Panel Study of Income Dynamics, we find that the intergenerational correlation in expenditures is no larger than that in income, suggesting limited intra-family risk-sharing. On the other hand, even after controlling for the intergenerational correlation in income, the expenditures correlation remains significant. This suggests that other factors such as preferences, access to credit, and non-pecuniary inter vivos transfers potentially played a role in consumption smoothing across generations within a family. We also find that the correlation coefficients estimated using food and imputed total expenditures are smaller than that estimated using the measured total expenditures.