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 conclusion drawn is that the proposed Supply Chain Risk Management Framework with the inclusion of the risk management influencers component provides a more robust description of the factors that affect the nature of therisk management responses in particular situations.
Abstract: Changes in the ‘shape’ of risk (ie sources, nature, triggers, scale, rapidity and severity of consequences) relating to supply chains pose challenges for risk management and the underpinning discipline domains such as Operations Research that have traditionally provided guidance and support. The aim is to evaluate these challenges, specifically in the context of supply chain risk management and to consider new approaches to support management. An overall Supply Chain Risk Management Framework is constructed, comprising five components—risk drivers, risk management influencers, decision maker characteristics, risk management responses and performance outcomes. The focus is towards the risk management influencers, recognizing that other components have been investigated elsewhere in the operations literature. Four elements are identified within this risk management component, two conventional elements, rewards and risks, and two new elements, timescale and portfolio effects. An empirical case example is employed to illustrate these issues of risk management in the manufacturing sector and to evaluate the approaches employed to manage risk and performance. The conclusion drawn is that the proposed Supply Chain Risk Management Framework with the inclusion of the risk management influencers component provides a more robust description of the factors that affect the nature of the risk management responses in particular situations. This also demonstrates the need for the Operations Research discipline to evolve a more diverse set of risk management tools and approaches (ie both quantitative and qualitative) to effectively address the diversity of issues and contexts.
149 citations
TL;DR: A strong macroeconomy at both the state and national levels reduced both the number of families who were living in poverty and the severity of poverty, but the magnitude and source of these antipoverty effects were not uniform across family structures and racial groups or necessarily over time.
Abstract: We examined the effects of macroeconomic performance and social policy on the extent and depth of poverty in America using state-level panel data from the 1981–2000 waves of the Current Population Survey. We found that a strong macroeconomy at both the state and national levels reduced both the number of families who were living in poverty and the severity of poverty. The magnitude and source of these antipoverty effects, however, were not uniform across family structures and racial groups or necessarily over time. While gains in the eradication of poverty, in general, were tempered by rising wage inequality, simulations indicated that female-headed families and families that were headed by black persons experienced substantial reductions in poverty in the 1990s largely because of the growth in median wages. An auxiliary time-series analysis suggests that the expansions in the federal Earned Income Tax Credit of the 1990s accounted for upward of 50% of the reduction in after-tax income deprivation.
148 citations
148 citations
TL;DR: In this paper, the authors proposed a method which enables the user to identify commodities that all individuals who can agree on certain weak assumptions with regard to the social welfare function will agree upon as worth subsidizing or taxing in the absence of efficiency considerations.
Abstract: The paper suggests a method which enables the user to identify commodities that all individuals who can agree on certain weak assumptions with regard to the social welfare function will agree upon as worth subsidizing or taxing in the absence of efficiency considerations. The method is based on an extension of the stochastic dominance criteria and it is illustrated using data from Israel.
148 citations
TL;DR: In this article, a distributional model of risk is described in which it is hypothesized that people's judgments of risk are similar to the kinds of judgments made in welfare economics concerning inequality of income distributions.
Abstract: : A distributional model of risk is described in which it is hypothesized that people's judgments of risk are similar to the kinds of judgments made in welfare economics concerning inequality of income distributions. The role played by the Lorenz curve in analyzing inequality is described and it is shown how Lorenz curves can be used to describe risks. Two hypotheses are presented concerning risk: first, that representing risks with Lorenz curves will be useful in capturing the salient psychological features of risk, and second, that people's judgments of positive risks will be similar functionally to judgments of distributional inequality. Six experiments are presented that support the distributional model of risk for both preference judgments and judgments of riskiness. The implications of these experiments are described and the distributional model is compared with alternative models of risk.
148 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