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 investigated the importance of heterogeneity using random-assignment data from Connecticut's Jobs First waiver, which features key elements of post-1996 welfare programs and concluded that welfare reform's effects are likely both more varied and more extensive than has been recognized.
Abstract: Labor supply theory predicts systematic heterogeneity in the impact of recent welfare reforms on earnings, transfers, and income. Yet most welfare reform research focuses on mean impacts. We investigate the importance of heterogeneity using random-assignment data from Connecticut's Jobs First waiver, which features key elements of post-1996 welfare programs. Estimated quantile treatment effects exhibit the substantial heterogeneity predicted by labor supply theory. Thus mean impacts miss a great deal. Looking separately at samples of dropouts and other women does not improve the performance of mean impacts. We conclude that welfare reform's effects are likely both more varied and more extensive than has been recognized.
318 citations
TL;DR: This article employed a common general formula for inequality indexes to answer several basic questions about intercountry income inequality in recent decades: Has inequality across nations increased or declined (and why have earlier studies yielded mixed results)? Have different rates of population growth played a significant role in the trend? Have large nations dominated the trend; are the results robust over different inequality measures and different income series?
Abstract: This article employs a common general formula for inequality indexes to answer several basic questions about intercountry income inequality in recent decades: Has inequality across nations increased or declined (and why have earlier studies yielded mixed results)? Have different rates of population growth played a significant role in the trend? Have large nations dominated the trend? Are the results robust over different inequality measures and different income series? Two findings stand out. First, different rates of population growth in rich and poor nations played the predominant role in determining change in the distribution of per capita income across nations. Second, the centuries‐old trend of rising inequality leveled off from 1960 to 1989. The dependency theory thesis of a polarizing world system receives no support.
317 citations
TL;DR: This paper proposed a range-free approach to measure the middle class and polarization, based on partial orderings, which yields two polarization curves which, like the Lorenz curve in inequality analysis, signal unambiguous increases in polarization.
Abstract: Several recent studies have suggested that the distribution of income (earnings, jobs) is becoming more polarized. Much of the evidence presented in support of this view consists of demonstrating that the population share in an arbitrarily chosen middle income class has fallen. However, such evidence can be criticized as being range-specific—depending on the particular cutoffs selected. In this paper we propose a range-free approach to measuring the middle class and polarization, based on partial orderings. The approach yields two polarization curves which, like the Lorenz curve in inequality analysis, signal unambiguous increases in polarization. It also leads to an intuitive new index of polarization that is shown to be closely related to the Gini coefficient. We apply the new methodology to income and earnings data from the U.S. and Canada, and find that polarization is on the rise in the U.S. but is stable or declining in Canada. A cross-country comparison reveals the U.S. to be unambiguously more polarized than Canada.
317 citations
TL;DR: In this paper, a newly emerging body of social stratification research grounded in theories of civil society is presented, with the goal of providing an alternative social and economic development paradigm to the dominant neoclassical/rational choice/human capital perspective.
Abstract: This analysis is designed to extend a newly emerging body of social stratification research grounded in theories of civil society. The goal of this larger body of research and writing is to provide an alternative social and economic developmentparadigm to the dominant neoclassical/rational choice/human capital perspective. In an economic world woven together by global marketforces, local social structures can become key variables that influence which places prosper and which decline. We begin by hypothesizing that local capitalism and civic engagement variables are associated with positive socioeconomic outcomes (higher income levels and lower levels of income inequality, poverty, and unemployment). To test these notions, we employ data on more than 3,000 U.S. counties. Net of the substantial effects of the control variables, three measures of local civic society -small manufacturing establishments, familyfarms, and civically engaged religious denominations - vary as hypothesized in three offour models. The performance of these local capitalism and civic engagement variables suggests a robust association with beneficial local socioeconomic outcomes. We conclude by outlining needed research on civil society that would contributefurther to a social developmentperspective. Over the past twenty-five years, social scientists have begun to define the contours of a global system of economic production and mass consumption (Wallerstein 1974). During this time, the orienting frame for analysis has shifted from an
314 citations
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TL;DR: In this article, the analysis of inequality is placed in the context of recent developments in economics and statistics, and it is shown that inequality can be expressed as a function of economic and statistical factors.
Abstract: The analysis of inequality is placed in the context of recent developments in economics and statistics.
311 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
Posted Content•
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