On the Measurement of Inequality
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 investigate the effects of embodied carbon tariffs with a computable general equilibrium model of global trade and energy use, and they find that the main welfare effect of the tariffs is to shift the burden of OECD climate policy to the developing world.
Abstract: In a world where the prospects of a global agreement to control greenhouse gas emissions are bleak, the idea of using trade policy as an implicit regulation of foreign emission sources has gained many supporters in countries contemplating unilateral climate policies. Embodied carbon tariffs tax the direct and indirect carbon emissions embodied in imported goods. The appeal seems obvious: as OECD countries are, on average, large net importers of embodied emissions from non-OECD countries, carbon tariffs could substantially extend the reach of OECD climate policies. We investigate this claim by simulating the effects of embodied carbon tariffs with a computable general equilibrium model of global trade and energy use. We find that embodied carbon tariffs do effectively reduce carbon leakage. However, the scope for improvements in the global cost-effectiveness of unilateral climate policy is limited. The main welfare effect of the tariffs is to shift the burden of OECD climate policy to the developing world.
76 citations
TL;DR: In this paper, an alternative approach to inequality analysis that is rigorous, has a natural interpretation, and embeds both the ordinal data problem and the well-known cardinal data problem is proposed.
Abstract: The standard theory of inequality measurement assumes that the equalisand is a cardinal quantity, with known cardinalization. However, one often needs to make inequality comparisons where either the cardinalization is unknown or the underlying data are categorical. We propose an alternative approach to inequality analysis that is rigorous, has a natural interpretation, and embeds both the ordinal data problem and the well-known cardinal data problem. We show how the approach can be applied to the inequality of happiness and of health status.
76 citations
Cites background from "On the Measurement of Inequality"
...Multidimensional generalizations of the relative and absolute inequality indices: the Atkinson-Kolm-Sen approach. Journal of Economic Theory 67, 251 265. Van Doorslaer, E. and A. M. Jones (2003). Inequalities in self-reported health: Validation of a new approach to measurement....
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01 Jan 2015
TL;DR: It is found that almost all services, apart from dental and optician services, are used more by those at the lower end of the income distribution, but that this group also have the greatest need for health care.
Abstract: This paper analyses the extent of equity of health service delivery across the income distribution in Ireland – that is the extent to which there is equal treatment for equal need irrespective of income. We find that almost all services, apart from dental and optician services, are used more by those at the lower end of the income distribution, but that this group also have the greatest need for health care. The comparison of health need to health care delivery across the income distribution without standardising for confounding factors suggests that those in higher income groups receive more health care for a given health status indicating inequity. However, need for health care is highest among the elderly and this group also tend to be at the bottom of the income distribution. Once we standardise for age, sex and location we find that hospital services are distributed equitably across the income distribution, whereas GP and prescription services tend to be pro-poor (used more by those with lower incomes for a given health status) and dental and optician services tend to be pro-rich (used more by those with higher incomes for a given health status).
76 citations
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TL;DR: In this article, the authors propose a new class of mobility measures which they call "measures of distributional difference" and demonstrate that many leading measures of mobility proposed in the literature are members of this class.
Abstract: We propose a new class of mobility measures which we call “measures of distributional difference.” Members of this new class measure mobility as integrated weighted distributional difference. We demonstrate that many leading measures of mobility proposed in the literature are members of this class. Our approach therefore permits a considerable unification of a diverse literature. Moreover, our tools enable us to make explicit the implicit weighting properties of leading members of this class whose original forms do not lend themselves to such an analysis. This leads us to question the attractiveness of some popular mobility indices.
76 citations
TL;DR: In this paper, the authors established the principles that should govern the welfare and inequality analysis of heterogeneous income distributions and showed that two basic criteria, the "equity preference" condition and the "compensation principle", are fundamentally incompatible.
Abstract: This paper establishes the principles that should govern the welfare and inequality analysis of heterogeneous income distributions. Two basic criteria – the ‘equity preference’ condition and the ‘compensation principle’ – are shown to be fundamentally incompatible. The paper favours the latter, thereby vindicating the traditional method of dealing with heterogeneous samples. However, inequality and welfare comparisons will usually be well defined only if equivalent incomes are obtained using constant scale factors; and researchers will need to distinguish clearly between inequality of nominal incomes and inequality of living standards. Furthermore, household observations must always be weighted according to family size.
76 citations
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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]....
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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...
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1,544 citations
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