  To simultaneously overcome the limitation of the Gini index in that it is
less sensitive to inequality at the tails of income distribution and the
limitation of the inter-decile ratios that ignore inequality in the middle of
income distribution, an inequality index is introduced. It comprises three
indicators, namely, the Gini index, the income share held by the top 10%, and
the income share held by the bottom 10%. The data from the World Bank database
and the Organization for Economic Co-operation and Development Income
Distribution Database between 2005 and 2015 are used to demonstrate how the
inequality index works. The results show that it can distinguish income
inequality among countries that share the same Gini index but have different
income gaps between the top 10% and the bottom 10%. It could also distinguish
income inequality among countries that have the same ratio of income share held
by the top 10% to income share held by the bottom 10% but differ in the values
of the Gini index. In addition, the inequality index could capture the dynamics
where the Gini index of a country is stable over time but the ratio of income
share of the top 10% to income share of the bottom 10% is increasing.
Furthermore, the inequality index could be applied to other scientific
disciplines as a measure of statistical heterogeneity and for size
distributions of any non-negative quantities.

General Economics;Economics;Methodology