Pareto index
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In economics the Pareto index, named after the Italian economist and sociologist Vilfredo Pareto, is a measure of the breadth of income distribution. It is one of the parameters specifying a Pareto distribution and embodies the Pareto principle, which was an observation that 20% of the members of Italian society owned 80% of the wealth.
One of the simplest characterizations of the Pareto distribution, when used to model the distribution of wealth, says that the proportion of the population whose wealth exceeds any positive number x > xm is
- <math>\left(\frac{x_\mathrm{m}}{x}\right)^\alpha</math>
where xm is the wealth of the poorest people (the subscript m stands for minimum). The Pareto index is the parameter α. The larger the Pareto index, the smaller the proportion of very wealthy people.