Modern macroeconomics empirically addresses economy-wide incentives behind economic actions by using insights from the way a single representative household would behave. This analytical approach requires that incentives of the poor and the rich are strictly aligned. In empirical analysis a...

Two conversion schemes may be employed for assessing income inequality from household equivalent incomes: to weight household units by size or by needs. Using data from the Luxembourg Income Study, we show the sensitivity of country inequality rankings to conversion schemes and explain the...