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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120 citations
TL;DR: This paper uses experimental and multinomial logit techniques to estimate the effects of envy and malice in economic decisions involving Pareto efficiency, turning out to be powerful motivations with strong differential impacts across countries and relative positions.
Abstract: Economists have long speculated that envy and malice play important roles in economic decisions. Surprisingly little empirical evidence has been offered in support of such claims. This paper uses experimental and multinomial logit techniques to estimate the effects of envy and malice in economic decisions involving Pareto efficiency. Envy and malice turn out to be powerful motivations with strong differential impacts across countries and relative positions. In some cases, opposition to Pareto gains reaches 60%. Behind a veil of ignorance, however, opposition falls to 10% overall. Pareto efficiency thus garners its greatest support under conditions which can lay claim to greatest legitimacy, those free of situational and personal bias. “... the greater part of human actions have their origin not in logical reasoning but in sentiment. This is particularly true for actions that are not motivated economically.... Man, although impelled to act by nonlogical motives, likes to tie his actions logically to certain principles; he therefore invents these a posteriori in order to justify his actions.” V. Pareto in The rise and fall of the elites (1968, p. 27)
120 citations
TL;DR: In this article, a multidimensional approach for combining several indicators of well-being, including the traditional money-income indicators, is presented, which avoids the difficult and much criticized task of computing imputed incomes for such indicators as net worth and schooling.
Abstract: We demonstrate a multidimensional approach for combining several indicators of well-being, including the traditional money-income indicators. This methodology avoids the difficult and much criticized task of computing imputed incomes for such indicators as net worth and schooling. Inequality in the proposed composite measures is computed using relative inequality indexes that permit simple analysis of both the contribution of each welfare indicator (and its factor components) and within and between components of total inequality when the population is grouped by income levels, age, gender, or any other criteria. The analysis is performed on U.S. data using the Michigan Survey of Income Dynamics.
119 citations
Cites background or methods from "On the Measurement of Inequality"
...GE contains most of the well-known measures, including both of Theil's information measures of inequality, the coefficient of variation, and other measures that are ordinally equivalent to the family proposed by Atkinson (1970)....
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...More recent discussion of this kind of approach is found in Maasoumi (1986), Atkinson and Bourguignon (1982), Kakwani (1984), and Rosen (1984)....
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TL;DR: In this article, the authors examined how the human demand on bioproductive lands, as measured by the Ecological Footprint, is distributed across the globe using methods commonly used to measure the distribution of income.
118 citations
TL;DR: This tutorial describes the technical details of how to conduct distributional cost-effectiveness analysis (DCEA), using an illustrative example comparing alternative ways of implementing the National Health Service (NHS) Bowel Cancer Screening Programme (BCSP).
Abstract: Distributional cost-effectiveness analysis (DCEA) is a framework for incorporating health inequality concerns into the economic evaluation of health sector interventions. In this tutorial, we describe the technical details of how to conduct DCEA, using an illustrative example comparing alternative ways of implementing the National Health Service (NHS) Bowel Cancer Screening Programme (BCSP). The 2 key stages in DCEA are 1) modeling social distributions of health associated with different interventions, and 2) evaluating social distributions of health with respect to the dual objectives of improving total population health and reducing unfair health inequality. As well as describing the technical methods used, we also identify the data requirements and the social value judgments that have to be made. Finally, we demonstrate the use of sensitivity analyses to explore the impacts of alternative modeling assumptions and social value judgments.
117 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