Measuring Income Inequality: An Application of the Population Dynamic Theil's Entropy

In this paper we use the index we call Population Dynamic Theil's Entropy to analyze as the income inequality varies on time. The index may consider both the inequality among the classes in which we assign the individuals and the inequality within each class. This inequality measure working in a dynamic way allows to forecast inequality in time. Besides it may capture not only changes in the wealth but also changes in the population composition. The earned results are relevant for adopting a social and economic policy of wealth distribution. We fulfilled the model with statistics from the Organization for Economic Cooperation and Development and we applied it to Mexico, Portugal and Spain. We picked up economic data about population, means and medians of the equivalised net income for the three countries. The data refer to years from 2004 to 2011.