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 present an empirical application of the distributional characteristic and its decomposition using Mexican data, showing that the welfare gains from using categorical targeting and means testing reflect improvements in redistributive and targeting efficiency respectively.
Abstract: The distributional characteristic provides an attractive alternative to conventional approaches used to evaluate the targeting performance of transfer programs. We decompose it into two components that are useful both conceptually and empirically; one capturing the targeting efficiency of the instrument, the other its redistributive efficiency. The redistributive index can also be generalized for the purposes of evaluating the degree of progressivity in tax-benefit structures. For illustrative purposes, we present an empirical application of the distributional characteristic and its decomposition using Mexican data. The welfare gains from using categorical targeting and means testing reflect improvements in redistributive and targeting efficiency respectively.
57 citations
01 Jan 1987
TL;DR: The authors discusses the psychology of risk: what risk is (if it is anything at all), how people think about it, what they feel about it and what they do about it.
Abstract: Publisher Summary This chapter discusses the psychology of risk: what risk is (if it is anything at all), how people think about it, what they feel about it, and what they do about it. The chapter describes the way psychologists think about risk: how they study it, what tasks they use, what factors they vary, and what models they build (or borrow) to describe risk-taking behavior. Technically, the word risk refers to situations in which a decision is made whose consequences depend on the outcomes of future events having known probabilities. Psychological studies of risky choice (it is the term used conventionally to refer to all but the most extreme instances of ignorance or ambiguity) fall into two groups. At one extreme are the studies run by mathematically inclined experimental psychologists in which subjects make decisions about gambles described in terms of amounts and probabilities. At the other extreme are studies run by personality psychologists, who are mostly interested in individual differences in risk taking. A theory of risky choice is presented in the chapter that attempts to meld the strengths of both approaches. Empirically and methodologically it is tied to the experimental approach to risky choice. But theoretically it is more strongly tied to motivational approaches.
57 citations
TL;DR: In this paper, the authors describe an optimistic story of the UK economy over the past 30 years, and propose a series of radical reforms to address these problems: such as more flexibility in schooling with a new focus on disadvantage; a new architecture for national infrastructure decisions and more competition in banking.
Abstract: What policies and institutions are needed to sustain long-run growth in the UK? We describe an optimistic story of the UK economy over the past 30 years. From the late 1970s, the UK reversed a century of relative decline in terms of per capita GDP with our main counterparts in the US, France and Germany. A key factor behind this improvement was an array of policy changes including an expansion of higher education and greater competition in product and labour markets. However, major weaknesses with respect to long-run investment in human capital, infrastructure and innovation remain. These are hampered by problems of short-termism and policy risk. We propose a series of radical reforms to address these problems: such as more flexibility in schooling with a new focus on disadvantage; a new architecture for national infrastructure decisions and more competition in banking.
57 citations
TL;DR: In this article, the design of the personal income tax and social security benefits that vary with the size of the family is discussed. But the authors focus on the analytical problems of policy design that arise from constraints on the instruments which may be used, from differences in social judgements about the desirability of redistribution, and from differences of view about the disincentive effects of taxation.
57 citations
TL;DR: In this article, the authors proposed a new National Sustainable Development Index (NSDI) based on the modification of the Human Development Index(HDI), which aims to improve the widely adopted HDI index by incorporating more comprehensive sustainability perspectives, so as to help policy makers to better analyze the sustainability-related issues facing their countries.
Abstract: In response to the UN 2030 Agenda for Sustainable Development, this paper proposes a new National Sustainable Development Index (NSDI), based on the modification of the Human Development Index (HDI). The purpose of our research was to improve the widely adopted HDI index by incorporating more comprehensive sustainability perspectives, so as to help policy makers to better analyze the sustainability-related issues facing their countries. After clarifying the concept of sustainable development, our research suggests that this term represents a coordination and configuration of economic, social, and environmental aspects of development, with its major focuses on balancing intra-generational welfare and maximizing the total welfare across generations. We then put forward a novel NSDI framework including 12 indicators from dimensions of economy, resource environment, and society, and calculated the weights of 12 indicators using the entropy method. To further validate our proposed index, this paper also measured the NSDIs of 163 countries in the world, and compared this index with the HDI and other well-known modification indices of HDI. The results showed that the NSDI is a reliable and relative complete index for sustainable development assessment, which makes up for the shortcomings of existing indices.
56 citations
Cites methods from "On the Measurement of Inequality"
...Income index According to Atkinson [44], calculating the income index can reflect fairness and equality in the case of unequal distribution factors, based on the disposable income or consumption of per capita family....
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...Life expectancy index According to Atkinson [44], calculating the life expectancy index can reflect fairness and equality in the case of unequal distribution factors, based on the data of UN life table....
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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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"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