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: This article explored the origins of social inequality via a case study of Neolithic Catalhoyuk East (Turkey), in particular its ground stone artefacts, which were central to food preparation and craft production.
71 citations
TL;DR: This article reviewed the evolution of attempts to understand the nature of growth incidence curves, from the statistical decompositions associated with generalizations of the Oaxaca-Blinder method, to more recent efforts to generate "economically consistent" counterfactuals, drawing on structural, reduced-form, and computable general equilibrium models.
Abstract: The joint determination of aggregate economic growth and distributional change has been studied empirically from at least three different perspectives. A macroeconomic approach that relies on cross-country data on poverty, inequality, and growth rates has generated some interesting stylized facts about the correlations between these variables, but has not shed much light on the underlying determinants. “Meso-” and microeconomic approaches have fared somewhat better. The microeconomic approach, in particular, builds on the observation that growth, changes in poverty, and changes in inequality are simply different aggregations of information on the incidence of economic growth along the income distribution. This paper reviews the evolution of attempts to understand the nature of growth incidence curves, from the statistical decompositions associated with generalizations of the Oaxaca-Blinder method, to more recent efforts to generate “economically consistent” counterfactuals, drawing on structural, reduced-form, and computable general equilibrium models.
71 citations
TL;DR: In this article, the authors derived optimal tax formulae and optimal tax rates for the case where there are many consumers, an income tax is impossible and the government has to trade off efficiency in order to improve the real distribution of income.
71 citations
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TL;DR: The authors examine the nature of individual and collective preferences over alternative tax schedules, in the context of a simple two-sector model, and show that with a purely sociotropic electorate there exists a flat-rate schedule which is a majority equilibrium, and with self-interested voters who seek to minimize their own tax burdens, greater marginal-rate progression may well be preferred by middle-and upper-income voters.
Abstract: All advanced democracies have adopted income taxes with considerable progression in marginal tax rates. To explain this we examine the nature of individual and collective preferences over alternative tax schedules, in the context of a simple two-sector model. We first consider the case of altruistic or "sociotropic" citizens who view the income tax as a means of achieving a fairer or more egalitarian distribution of income. We show that greater marginal-rate progressivity may well be less fair; that a "fairest" tax, however defined, is always a linear or "flat-rate" schedule in which all incomes are taxed at the same marginal rate; and that with a purely sociotropic electorate there exists a flat-rate schedule which is a majority equilibrium. We then show that with "self-interested" voters who seek to minimize their own tax burdens, greater marginal-rate progression may well be preferred by middle-and upper-income voters; that for middle-income citizens the optimal schedule is a sharply progressive one; and that within the set of individually optimal schedules there exists a majority equilibrium, which is a progressive schedule which minimizes the burden on median-income or middle class citizens, at the expense of lower-and upper-income taxpayers.
71 citations
TL;DR: This paper introduced new measures of both relative and absolute poverty using the notion of representative income of a community corresponding to the censored income distribution, which satisfy the monotonicity and transfer axioms proposed by Sen (1976) in all cases.
Abstract: This paper introduces new measures of both relative and absolute poverty using the notion of representative income of a community corresponding to the censored income distribution These new measures satisfy the monotonicity and transfer axioms proposed by Sen (1976) in all cases
71 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