Inequality and development
Palma Ratio
Definition
The Palma ratio is the ratio of the national income share received by the richest 10 per cent of the population to that received by the poorest 40 per cent. Proposed by economist José Gabriel Palma, it is based on the empirical observation that the middle deciles capture roughly half of national income almost everywhere, so inequality differences are driven mainly by what happens at the two tails.
References
Supports definition and framing.
Supports definition and framing.
Overview
What it means
A Palma ratio of 1 means the top tenth earns the same as the bottom four-tenths combined; in highly unequal countries the ratio exceeds 3 or 4. The measure is more intuitive and policy-relevant than the Gini coefficient because it states plainly how the two ends of the distribution compare.
How it is used
The ratio is used by the OECD, UN agencies and development researchers to track inequality, and features in debates on SDG target 10. 1 on shared prosperity and inclusive growth.
Why it matters
Inequality shapes the social fabric on which sustainability depends; simple, communicable metrics like the Palma ratio help keep distribution — not just growth — visible in policy.