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 studied the U.S. earning trends since 1950 and gave explanations for the inequality in earnings and found that both slow growth and increased inequality appeared in the comparison of adult male earnings distributions for 1979 and 1987.
Abstract: The article studies the U.S. earning trends since 1950 and gives explanations for the inequality in earnings. Both slow growth and increased inequality appear in the comparison of adult male earnings distributions for 1979 and 1987. Trends in women's earnings paint a somewhat brighter picture. Women, like men, have experienced slow hourly wage growth and growing wage inequality. But in terms of annual earnings, both factors have been offset by changes in hours worked. The result is a significant increase in the proportion of women who earn $20,000 a year or more. A combination of shifts in supply and shifts in demand is necessary to explain the observed trends between these groups. A critical aspect of supply shifts was the entry into the labor market of the well-educated baby boom generation. Demand shifts can be characterized as a long-term trend toward increasing relative demand for highly skilled workers. The growth in within group earnings inequality has many potential explanations, but it is not well understood and contains opportunities for future research.
1,616 citations
TL;DR: In this paper, the authors consider a wide class of inequality indices and identify those which are additively decomposable, including the squared coefficient of variation and the two Theil's entropy formulas.
Abstract: This paper considers a wide class of inequality indices and identifies those which are additively decomposable. The sub-class of mean independent, additively decomposable measures turns out to be a single parameter family which includes the squared coefficient of variation and the two Theil's entropy formulas.
1,566 citations
TL;DR: In this article, the authors reexamine the age-old question of direct versus indirect taxation and the relationship of these taxes to the goals of efficiency, vertical equity and horizontal equity, and argue that any treatment of the choice of tax structures must be centrally concerned with distributional considerations.
1,519 citations
30 Oct 2006
TL;DR: In this paper, the authors examine the evidence on the economic impacts of climate change itself, and explore the economics of stabilizing greenhouse gases in the atmosphere, concluding that the benefits of strong, early action on climate change considerably outweigh the costs.
Abstract: The Review's executive summary states that "the Review first examines the evidence on the economic impacts of climate change itself, and explores the economics of stabilizing greenhouse gases in the atmosphere. The second half of the Review considers the complex policy challenges involved in managing the transition to a low-carbon economy and in ensuring that societies can adapt to the consequences of climate change that can no longer be avoided".
The report's main conclusion is that the benefits of strong, early action on climate change considerably outweigh the costs.
1,472 citations
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TL;DR: This article reviewed the evidence on cross-national comparisons of earnings and income inequality in OECD countries, concluding with a call for more work on empirically testable structural models of household income distribution.
Abstract: This article reviews the evidence on cross-national comparisons of earnings and income inequality in OECD countries. It begins with a series of stylized facts which are then examined and supported by recent studies in the field. Economic, demographic, institutional and policy-related influences on earnings and income distribution are reviewed. The paper concludes with a call for more work on empirically testable structural models of household income distribution.
1,320 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