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 a review of the use of the GenderRelated Development Index (GDI) and the Gender Empowerment Measure (GEM) by the United Nations Development Programme (UNDP).
Abstract: The 1995 Human Development Report introduced two new measures of well‐being: the Gender‐Related Development Index (GDI) and the Gender Empowerment Measure (GEM). The two indexes were created with the intention of attracting more attention to gender inequality issues. This paper first of all reviews the attention the indexes received in the publications of the United Nations Development Programme itself, concentrating on their use in national and subnational Human Development Reports. It also reviews how the two indexes were used in academia and the press. The main result of the review is that the GDI in particular seems to be a measure that is not used appropriately. In most cases of misuse, the GDI was wrongly interpreted as a measure of gender inequality. Due to the many misinterpretations, the potential policy impact the GDI and GEM can have seems limited.
168 citations
TL;DR: In this article, household composition effects in consumer theory have been examined in the areas of the measurement of cost of living indices, the study of poverty and inequality and in certain aspects of social policy.
168 citations
TL;DR: In this paper, the authors present the Atkinson-Stiglitz and Chamley-Judd results that capital income should not be taxed, but conclude that the required conditions are too restrictive and not robust enough for policy purposes.
Abstract: The traditional starting place for a study of tax reform is a definition of an ideal tax base, which is then adjusted in light of additional issues. After arguing briefly that this is not a good starting place, the essay reviews the optimal taxation literature inferences for tax base policy, focusing on three questions. - If there is annual non-linear (progressive) taxation of earnings, how should annual capital income be taxed - not at all, linearly (flat rate, as in the Nordic dual income tax), by relating the marginal tax rates on capital and labour incomes (as in the US), or by taxing all income the same? - If there is annual non-linear taxation of earnings, should there be a deduction for net savings? - If there is annual non-linear taxation of earnings, is it worth having a more complex tax structure, particularly age-dependent tax rates? Would greater use of age-dependent rules in capital income taxation be worthwhile? The essay presents the Atkinson-Stiglitz and Chamley-Judd results that capital income should not be taxed, but concludes that the required conditions are too restrictive and not robust enough for policy purposes. Hence there should be some role for including capital income as a part of the tax base. The essay discusses some empirical underpinnings for two key elements in the conclusion - differences in savings propensities and the shape of earnings (and uncertainty about earnings) over the lifetime. The conclusion that capital income should be taxed does not lead to the conclusion that the tax base should be total income, the sum of labour income and capital income. The chapter leans toward relating marginal tax rates on capital and labour incomes as opposed to the Nordic dual tax. Also examined are age-dependent taxes (for example different taxation of earnings for workers of different ages).
168 citations
TL;DR: In this paper, the authors empirically examined the effect of digital bundling on sales in the context of the music industry, using data on weekly digital-track, digital-album and physical-album sales from January 2005 to April 2007 for all titles released by a sample of more than 200 artists.
Abstract: Fueled by digital distribution, unbundling is prevalent in many information and entertainment industries. What is the effect of this unbundling on sales, and what bundle characteristics drive this effect? The author empirically examines these questions in the context of the music industry, using data on weekly digital-track, digital-album, and physical-album sales from January 2005 to April 2007 for all titles released by a sample of more than 200 artists. The modeling framework, a system of an “album-sales” and a “song-sales” equation estimated with the seemingly unrelated regression method, explicitly accounts for the interaction between sales for the bundle and its components. The findings reveal that revenues decrease significantly as digital downloading becomes more prevalent, but the number of items included in a bundle (a measure of its “objective” value) is not a significant moderator of this effect. Instead, bundles with items that are more equal in their appeal and bundles offered by pr...
167 citations
TL;DR: The authors examined the distributional implications of selective compliance in sample surveys, whereby households with different incomes are not equally likely to participate and found that compliance probability falls monotonically as income rises.
Abstract: The authors examine the distributional implications of selective compliance in sample surveys, whereby households with different incomes are not equally likely to participate. They discuss poverty and inequality measurement implications for monotonically decreasing and inverted-U compliance-income relationships. The authors demonstrate that the latent income effect on the probability of compliance can be estimated from information on response rates across geographic areas. On implementing the method on the Current Population Survey for the United States, they find that the compliance probability falls monotonically as income rises. Correcting for non-response appreciably increases mean income and inequality, but has only a small impact on poverty incidence up to poverty lines common in the United States.
167 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