Theil index

The Theil index is a statistic primarily used to measure economic inequality[1] and other economic phenomena, though it has also been used to measure racial segregation.[2][3] The Theil index TT is the same as redundancy in information theory which is the maximum possible entropy of the data minus the observed entropy. It is a special case of the generalized entropy index. It can be viewed as a measure of redundancy, lack of diversity, isolation, segregation, inequality, non-randomness, and compressibility. It was proposed by a Dutch econometrician Henri Theil (1924–2000) at the Erasmus University Rotterdam.[3]

Henri Theil himself said (1967): "The (Theil) index can be interpreted as the expected information content of the indirect message which transforms the population shares as prior probabilities into the income shares as posterior probabilities."[4] Amartya Sen noted, "But the fact remains that the Theil index is an arbitrary formula, and the average of the logarithms of the reciprocals of income shares weighted by income is not a measure that is exactly overflowing with intuitive sense."[4]

  1. ^ Introduction to the Theil index from the University of Texas
  2. ^ "Segregation Measures". www.urban.org. Urban Institute. Retrieved 5 February 2018.
  3. ^ a b Parker, Lauren (20 July 2015). "Racial and Ethnic Segregation: In the News and On PolicyMap". PolicyMap. Retrieved 5 February 2018.
  4. ^ a b Conceicao, Pedro NMI2; Ferreira, Pedro M. (2000). "The Young Person's Guide to the Theil Index: Suggesting Intuitive Interpretations and Exploring Analytical Applications". SSRN Electronic Journal. doi:10.2139/ssrn.228703. ISSN 1556-5068. S2CID 19009769.{{cite journal}}: CS1 maint: numeric names: authors list (link)