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: The results support the deontological intuition that a sense of fairness is fundamental to distributive justice but, as suggested by moral sentimentalists, is rooted in emotional processing.
Abstract: Distributive justice concerns how individuals and societies distribute benefits and burdens in a just or moral manner. We combined distribution choices with functional magnetic resonance imaging to investigate the central problem of distributive justice: the trade-off between equity and efficiency. We found that the putamen responds to efficiency, whereas the insula encodes inequity, and the caudate/septal subgenual region encodes a unified measure of efficiency and inequity (utility). Notably, individual differences in inequity aversion correlate with activity in inequity and utility regions. Against utilitarianism, our results support the deontological intuition that a sense of fairness is fundamental to distributive justice but, as suggested by moral sentimentalists, is rooted in emotional processing. More generally, emotional responses related to norm violations may underlie individual differences in equity considerations and adherence to ethical rules.
309 citations
TL;DR: Tanzania appears to have been relatively successful in terms of the removal of illiteracy, and Sri Lanka has been successful in raising life expectancy, and the lesson to be learned from their experience is the great importance of employment expansion in poverty removal.
Abstract: An attempt is made to identify the developing countries that have performed better than others in terms of the indicators of the so called "quality of life" relating this progress to the nature of these economies and to the public policies followed in these countries. A table presents data on life expectation at birth and adult literacy rates for 100 countries that had a gross national product per head of less than $3000 in 1977. The data have some comparability and it is reasonable to use them for a rough international comparison of performance. 38 countries have shown distinction in 1 or both of the fields. There are 10 communist countries in the total list of 100 and 9 of them show some distinction. 8 of the 9 do this despite not having literacy figures reported. The entry is longevity which is arguably a more basic indicator of success than poverty. Many of the communist countries are wealthier than the mean or median developing country. Although the indices are relative ones the richer countries have typically done better on the whole. The longevity performance of the communist countries is typically superior. This applies to the poorer group also. Some of the high growth early capitalist countries also have very good performance in terms of the chosen indicators (e.g. Taiwan South Korea Hong Kong and Singapore). Taiwan and Hong Kong have the best overall performance record in terms of the 2 criteria for those 61 countries for which both sets of data are available. The countries that appear to have done relatively worse in terms of the indicators are those in the "middle" i.e. neither communist nor successfully capitalist. There are some exceptions. Tanzania appears to have been relatively successful in terms of the removal of illiteracy and Sri Lanka has been successful in raising life expectancy. In examining the excellent performance of the Republic of Korea and Taiwan the lesson to be learned from their experience is the great importance of employment expansion in poverty removal. The experiences of Sri Lanka and Tanzania are recounted to illustrate the positive role of state action. Like Sri Lankas program of social welfare Tanzanias literacy program shows how much can be achieved by a determined effort sensibly directed toward specific goals. Poverty removal and related features including longevity enhancement is ultimately dependent on a wide distribution of effective entitlements. This for any given level of per capita income--would tend to be reflected in the low level of inequality in the distribution of income.
309 citations
01 Oct 2000
TL;DR: In this paper, the authors show that economic growth is associated with lower carbon emissions at given average incomes, and lower inequality improves the trade off with economic growth, and that more pro-poor growth processes yield better longerterm trajectories of carbon emissions.
Abstract: associated with lower carbon emissions at given average incomes. We also confirm that economic growth generally comes with higher emissions. Thus our results suggest that trade-offs exist between climate control (on the one hand) and both social equity and economic growth (on the other). However, economic growth improves the trade off with equity, and lower inequality improves the trade off with growth. By combining growth with equity, more pro-poor growth processes yield better longer-term trajectories of carbon emissions.
301 citations
01 Jan 2002
TL;DR: In this article, the authors measured individuals' aversion to risk and inequality, and their concern for relative standing, through experimental choices between hypothetical societies and found that, on average, individuals are both fairly inequality-averse and have a strong concern for their relative income.
Abstract: Individuals’ aversion to risk and inequality, and their concern for relative standing, are measured through experimental choices between hypothetical societies. It is found that, on average, individuals are both fairly inequality-averse and have a strong concern for relative income. The results are used to illustrate welfare consequences based on a utilitarian SWF and a modified CRRA utility function. It is shown that the social marginal utility of income may then become negative, even at income levels that are far from extreme.
294 citations
TL;DR: In this paper, the authors define and statistically estimate a nonlinear relationship between individual effective income tax rates and economic income for United States tax return data for tax years 1979-89, and show that the relation is nonlinear.
Abstract: We define and statistically estimate a nonlinear relationship between individual effective income tax rates and economic income for United States tax return data for tax years 1979-89. The relation...
292 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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"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