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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 provide a logical delimitation of the subject of analysis in order to reach hermeneutic consistency and review the most important theoretical causes of income inequality.
Abstract: This paper contributes to the understanding of the phenomenon of income inequality by first providing a logical delimitation of the subject of analysis in order to reach hermeneutic consistency; second, by reviewing the most important theoretical causes of income inequality as evidence of the enormous intricacy of this phenomenon and its multifacetic nature; third, by describing the most important instruments of income inequality metrics, with emphasis on the different objective measures available in the literature and the way they are calculated. Special importance is given to the Gini coefficient due to its generalized application in empirical studies.

55 citations


Cites background from "On the Measurement of Inequality"

  • ...Other examples of the use of this kind of normative approach for the measurement of inequality are Champernowne (1952), Tinbergen (1970), Bentzel (1970), Atkinson (1970)....

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  • ...Later, Atkinson (1970) introduced the utilitarian approach to this measure by assuming that the total social welfare is the sum of the individual utilities of income....

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  • ...The reader should not be confused with the normative measure of inequality also developed by Atkinson (1970)....

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Journal ArticleDOI
TL;DR: In this article, the level of inequality and social polarization of household incomes at the census tract level is assessed for Canada's 22 largest Census Metropolitan Areas. And the proportion of households in middle-income census tracts is declining in most metropolitan centres, lending further support to arguments that Canada's middle class is in decline.
Abstract: Rising inequality and polarization of employment earnings have been clearly documented in Canada and most other developed economies in the 1990s. Following a critical discussion of the use of the Cini coefficient as a measure of inequality in geography, the level of inequality and social polarization of household incomes at the census tract level is assessed for Canada's 22 largest Census Metropolitan Areas. The distribution of household income among metropolitan census tracts is generally becoming more unequal. In addition, the proportion of households in middle-income census tracts is declining in most metropolitan centres, lending further support to arguments that Canada's middle class is in decline. L'augmentation des integalite et la polarisation des revenus d'emploi a ete clairement documentee au Canada et dans la plupart des autres pays industrialises durant les annees 90. A la suite d'une discussion critique sur l'utilisation du coefficient Gini comme mesure d'inegalite en geographie, on evalue le niveau d'inegaliteet la polarisation sociale des revenus menagers au niveau du secteur de recensement pour les 22 plus grandes regions metropolitaines de recensement au Canada. La distribution du revenu des menages parmi les secteurs de recensement metropolitains devient en general plus idgale. De plus, le fait que la proportion des menages parmi les secteurs de recensement d revenus moyens est d la baisse dans la plupart des regions metropolitaines soutient l'idee que la classe moyenne est en diminution.

55 citations

Journal ArticleDOI
TL;DR: In this paper, a decomposition of a conceptually similar index like Theil's (1967) was proposed, in order to permit clear decomposition in terms of the role of both factors plus an inter-factor correlation, in line with Duro and Padilla (2006).

55 citations

Journal ArticleDOI
TL;DR: In this paper, the authors brought new evidence to bear on the question of changes in income distribution amongst individuals in Australia between 1942-43 and 1989-90, and found that the distribution of individual income in J 989-90 is very similar to that estimated for 1942- 1943, and there is evidence that income inequality has been increasing during the 1980s.
Abstract: This paper brings new evidence to bear on the question of changes in income distribution amongst individuals in Australia between 1942–43and 1989–90. The changes observed over this period are analyzed in the context of previous studies of the changing distribution of income in Australia over the past 80 years. The main conclusions of the paper are that the distribution of individual income in J 989–90is very similar to that estimated for 1942–43, and there is evidence that income inequality has been increasing during the 1980s

55 citations

Journal ArticleDOI
TL;DR: In this paper, the authors developed a systematic way of answering the question of which population has experienced a greater extent of income mobility than another if, and only if, the former is ranked higher than the latter for all mobility measures which satisfy their axioms.
Abstract: Given a set of longitudinal data pertaining to two populations, a question of interest is the following: Which population has experienced a greater extent of income mobility? The aim of the present paper is to develop a systematic way of answering this question. We first put forth four axioms for income movement-mobility indices, and show that a familiar class of measures is characterized by these axioms. An unambiguous (partial) ordering is then defined as the intersection of the (complete) orderings induced by the mobility measures which belong to the characterized class; a transformation of income distributions is “more mobile” than another if, and only if, the former is ranked higher than the latter for all mobility measures which satisfy our axioms. Unfortunately, our mobility ordering depends on a parameter, and therefore, it is not readily apparent how one can apply it to panel data directly. In the second part of the paper, therefore, we derive several sets of parameter-free necessary and sufficient conditions which allow one to use the proposed mobility ordering in making unambiguous income mobility comparisons in practice.

55 citations

References
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Journal ArticleDOI
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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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...

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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