Shadow Incomes and Real Inequality Within the Framework of Leadership and Social Change

Abstract

Our paper suggests a new method of assessing income inequality which also allows estimating the contribution of each income decile group to the formation of shadow income. The authors identified the share of shadow incomes of individual population groups in its overall distribution with the assumption that the decile shadow income distribution corresponds to the structure of total expenditure breakdown by the respective population group. The paper normalises the expenditure structure and the availability of individual benefits on the basis of available data (official surveys of expenditure structure, self-assessment of household property and income) taking into account only those types of income and expenditure that have the most obvious signs of positive or negative impact on the opportunities of participation in the underground (or shadow) relations. The authors’ approach revealed significant differences in the estimates of the participation of different decile groups in the real income distribution, particularly in Ukraine, the Gini coefficient, as determined by official data, did not exceed 0.227 in 2015, adjusted by the income distribution indicators – from 0.248 to 0.266 depending on the source of data on the population inequality; a similar difference in the decile dispersion ratio was 4.5 versus 5.24–6.06. Thus, there is strong evidence that such differences should to be taken into account in analysing the real inequality of income distribution while choosing social policy alternatives.