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Journal ArticleDOI

On the Measurement of Inequality

01 Sep 1970-Journal of Economic Theory (Academic Press)-Vol. 2, Iss: 3, pp 244-263
TL;DR: In this paper, the problem of comparing two frequency distributions f(u) of an attribute y which for convenience I shall refer to as income is defined as a risk in the theory of decision-making under uncertainty.
About: This article is published in Journal of Economic Theory.The article was published on 1970-09-01. It has received 5002 citations till now. The article focuses on the topics: Income inequality metrics & Income distribution.
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TL;DR: In this paper, the authors compared nine common specialization indices, discussing their properties, strengths and weaknesses in order to unravel the differences between the indices they are applied to European employment structures in 2005, spanning 51 industries and 24 countries.
Abstract: This paper compares nine common specialization indices, discussing their properties, strengths and weaknesses In order to unravel the differences between the indices they are applied to European employment structures in 2005, spanning 51 industries and 24 European countries The resulting heterogeneity levels differ largely between relative and absolute specialization measures, but also within these two groups of indices As results are highly dependent on which measure is employed, it is important to be aware of carefully choosing appropriate indices in empirical studies in order to attain appropriate conclusions and conduct sound economic policy

84 citations

Posted Content
TL;DR: In this paper, the authors analyzed how a minimum wage affects employment, wage inequality, public expenditures, and aggregate income in the low-wage sector, and showed that a statutory minimum wage of EUR 7.50 per hour would cost 840,000 low-paid jobs and increase the fiscal burden by about EUR 4 billion per year.
Abstract: Using data from the 2006 wave of the German Socio-Economic Panel (GSOEP), this paper analyzes how a minimum wage affects employment, wage inequality, public expenditures, and aggregate income in the low-wage sector. It is shown that a statutory minimum wage of EUR 7.50 per hour would cost 840,000 low-paid jobs and increases the fiscal burden by about EUR 4 billion per year, while household income rises only by EUR 1.1 billion per year. Poor households, i.e. those eligible for Unemployment Benefits II, do not benefit from a minimum wage at all. Comparing the effects of a minimum wage with different types of wage subsidies that require the same additional public expenditures, the government can ensure more favorable employment - depending on the subsidies' incidence - and income effects. Wage subsidies also allow a more equal income distribution than statutory minimum wages. Combining a minimum wage with a wage subsidy, similar to the French minimum wage system, is extremely costly while such a policy is inferior to wage subsidies in all respects.

84 citations

01 Sep 2004
TL;DR: A review of the literature on priority setting in healthcare can be found in this article, where the authors suggest a need for a fundamental rethink of the role of cost-effectiveness analysis in priority setting.
Abstract: This report provides a review of the literature on priority setting in healthcare. It adopts an economic perspective on the problem of choosing the optimal portfolio of programs that can be afforded from a limited national healthcare budget. The traditional economic approach, proposes maximizing health gain (however measured) subject to a budget constraint, which implies ranking programs according to their cost-effectiveness ratio. However, our critical review suggests that this traditional approach is subject to three important difficulties: limitations in economic evaluation methodology, incorporating equity principles, and practical constraints. These suggest a need for a fundamental rethink of the role of cost-effectiveness analysis in priority setting. Methodological concerns include identifying whose perspective to adopt, the generalizability of results to multiple settings, the treatment of uncertainty and timing, and the treatment of interactions between programs. Most equity considerations can be captured in two broad headings: equity related to some concept of need and equity related to access to services. In principle equity concerns can be incorporated into an economic approach to priority setting with relative ease. However we find that many contributions to the debate on equity concepts are theoretical and remote from practical implementation issues. The traditional cost-effectiveness approach generally ignores the numerous practical constraints arising from the political, institutional, and environmental context in which priority setting takes place. These include the influence of interest groups, the transaction costs associated with policy changes, and the interactions between the provision and financing of health services. We find that treatment of such political economy perspectives is the least well-developed aspect of the priority setting literature and suggest some rudimentary models that could serve as a starting point for analysis

84 citations

Book
13 Dec 2004
TL;DR: In this article, an overview of consensus, freedom, equality, and Capacities is presented, along with a comparison with philosophy and economics' social ethics, as well as the theory of equivalence.
Abstract: Part I. Bases: Consensus, Freedoms and Capacities: 1. Macrojustice: an overview of its place, method, structure and result 2. Social freedom 3. The liberal theory 4. Free and equal in rights 5. Resources 6. Capacities Part II. Overall Distributive Justice: ELIE (Equal Labour Income Equalization): 7. Equal labour income equalization: general presentation 8. Models of labour and productivity 9. Equal duration income equalization 10. Information 11. Income justice 12. General equal labour income equalization: the model 13. Involuntary unemployment Part III. Comparisons with Policies and Philosophies: 14. Comparisons: general issues 15. Comparison with distributive schemes 16. Comparison with philosophies Part IV. The Degree of Community, Equality, Reciprocity, and Solidarity: 17. The degree of redistribution, solidarity, community, and reciprocity 18. Impartiality, consensus, and information 19. Disinterested judgments and the moral surplus 20. Communication and dialogue 21. Impartialization and consensus Part V. Comparison with Economics' Social Ethics: 22. Related economic values 23. The structure and substance of distributive principles 24. Happiness and freedom 25. Freedoms, responsibility, desert, merit, equality of opportunity, capacities, capabilities, basic needs 26. The theory of equivalence 27. Conclusion.

84 citations

References
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TL;DR: In this article, a measure of risk aversion in the small, the risk premium or insurance premium for an arbitrary risk, and a natural concept of decreasing risk aversion are discussed and related to one another.
Abstract: This paper concerns utility functions for money. A measure of risk aversion in the small, the risk premium or insurance premium for an arbitrary risk, and a natural concept of decreasing risk aversion are discussed and related to one another. Risks are also considered as a proportion of total assets.

5,207 citations

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1,748 citations


"On the Measurement of Inequality" refers background in this paper

  • ...3 See Rothschild and Stiglitz [13], Hadar and Russell [ 5 ], and Hanoch and Levy [6]....

    [...]

Journal ArticleDOI

1,738 citations


"On the Measurement of Inequality" refers methods in this paper

  • ...Then by applying the results of Pratt [l 11, Arrow [ 2 ], and others, we can see that this requirement (which may be referred to as constant (relative) inequality-aversion) implies that U(y) has the form...

    [...]

Journal ArticleDOI
TL;DR: JSTOR as discussed by the authors is a not-for-profit organization founded in 1995 to build trusted digital archives for scholarship, which is used to preserve their work and the materials they rely upon, and to build a common research platform that promotes the discovery and use of these resources.
Abstract: you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit organization founded in 1995 to build trusted digital archives for scholarship. We work with the scholarly community to preserve their work and the materials they rely upon, and to build a common research platform that promotes the discovery and use of these resources. For more information about JSTOR, please contact support@jstor.org.

1,544 citations

Journal ArticleDOI
TL;DR: In this paper, an analysis of the first step of the decision-making process of an individual decision maker among alternative risky ventures is presented, in terms of a single dimension such as money, both for the utility functions and for the probability distributions.
Abstract: Publisher Summary The choice of an individual decision maker among alternative risky ventures may be regarded as a two-step procedure. The decision maker chooses an efficient set among all available portfolios, independently of his tastes or preferences. Then, the decision maker applies individual preferences to this set to choose the desired portfolio. The subject of this chapter is the analysis of the first step. It deals with optimal selection rules that minimize the efficient set by discarding any portfolio that is inefficient in the sense that it is inferior to a member of the efficient set, from point of view of each and every individual, when all individuals' utility functions are assumed to be of a given general class of admissible functions. The analysis presented in the chapter is carried out in terms of a single dimension such as money, both for the utility functions and for the probability distributions. However, the results may easily be extended, with minor changes in the theorems and the proofs, to the multivariate case. The chapter explains a necessary and sufficient condition for efficiency, when no further restrictions are imposed on the utility functions. It presents proofs of the optimal efficiency criterion in the presence of general risk aversion, that is, for concave utility functions.

1,160 citations