Differential Privacy for Generalized Entropy Indices of Income Inequality

Abstract

The mean log deviation and the Theil index are two widely used measures of income inequality. The organization releasing these measures may be obligated to protect the confidentiality of the individual incomes used in the computations. In particular, the organization may wish to release versions of these measures with formal guarantees of privacy. The organization could do so by satisfying differential privacy; however, typical applications of differentially private algorithms are likely to add so much noise to the measures that they become unusable. We present differentially private algorithms for these indices with reasonable error properties. The algorithms rely on computing or approximating bounds on the smooth sensitivity, that is, the maximum absolute amount the inequality measures change when replacing any subset of the $n$ incomes in the reported data with arbitrarily chosen feasible values. For the mean log deviation, the algorithm runs in $O(n^2)$ time. For the Theil index, the algorithm runs in $O(n\log n)$ time. We illustrate the performance of each differentially private algorithm using individual-level and household-level income data from the Current Population Survey. We also examine repeated sampling properties of the algorithms using artificially generated data. The empirical results indicate when these differentially private algorithms can be expected to provide accurate estimates and when they are likely to introduce too much noise.