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.
Citations
More filters
TL;DR: This article presented a method for developing simple and easily interpreted measures of inequity that meet the desired axioms, including measures of disproportionality and malapportionment, and illustrated and contrasted results obtained with alternative indices.
90 citations
TL;DR: It is demonstrated that the introduction of successively more general transfer principles than the Pigou–Dalton principle of transfers forms a helpful basis for judging the normative significance of higher degrees of Lorenz dominance.
Abstract: This paper is concerned with the problem of ranking Lorenz curves in situations where the Lorenz curves intersect and no unambiguous ranking can be attained without introducing weaker ranking criteria than first-degree Lorenz dominance. To deal with such situations two alternative sequences of nested dominance criteria between Lorenz curves are introduced. At the limit the systems of dominance criteria appear to depend solely on the income share of either the worst-off or the best-off income recipient. This result suggests two alternative strategies for increasing the number of Lorenz curves that can be strictly ordered; one that places more emphasis on changes that occur in the lower part of the income distribution and the other that places more emphasis on changes that occur in the upper part of the income distribution. Both strategies turn out to depart from the Gini coefficient; one requires higher degree of downside and the other higher degree of upside inequality aversion than what is exhibited by the Gini coefficient. Furthermore, it is demonstrated that the sequences of dominance criteria characterize two separate systems of nested subfamilies of inequality measures and thus provide a method for identifying the least restrictive social preferences required to reach an unambiguous ranking of a given set of Lorenz curves. Moreover, it is demonstrated that the introduction of successively more general transfer principles than the Pigou–Dalton principle of transfers forms a helpful basis for judging the normative significance of higher degrees of Lorenz dominance. The dominance results for Lorenz curves do also apply to generalized Lorenz curves and thus provide convenient characterizations of the corresponding social welfare orderings.
90 citations
TL;DR: Using 1980 state Census data, the Gini ratio, Theil index, coefficient of variation, Atkinson measure (four values), and Nelson index were regressed with nineteen SES variables traditionally found significant with Gini in past research as discussed by the authors.
Abstract: Using 1980 state Census data, the Gini ratio, Theil index, coefficient of variation, Atkinson measure (four values), and Nelson index as separate measurements of income inequality are regressed with nineteen SES variables traditionally found significant with Gini in past research. The standard deviation of educational attainment is dominant among all independent variables as the strongest predictor of inequality. Mean family income, dominant in prior research, is a distant second in predictiveness. More diversity than commonality is evident among the nineteen SES variables as they predict income inequality measured by the eight different techniques. Copyright 1988 by MIT Press.
90 citations
TL;DR: In this paper, the authors developed a new method of measuring the distributional impact of price changes by computing distributional characteristics of commodities from household budget survey data and applied it to Hungary and the United Kingdom.
Abstract: In Soviet-type economies, commodity prices were distorted as part of the redistributive system of the state, but with the transition, prices have been liberalized and taxes made more uniform. Has this change adversely affected the distribution of purchasing power? This paper develops a new method of measuring the distributional impact of price changes by computing the distributional characteristics of commodities from household budget survey data and applies it to Hungary and the United Kingdom, finding that the distributional impacts over the past decade were negligible and not significantly different from zero in both cases. Copyright 1995 by Royal Economic Society.
90 citations
TL;DR: In this article, the first estimates of global inequality that take into account data on the incomes of the top one percent within countries are presented, and the authors analyze various aspects of this distribution, including its within-and between-country components, and changes in relative versus absolute global inequality.
Abstract: This chapter investigates recent advances in our understanding of the global distribution of income, and produces the first estimates of global inequality that take into account data on the incomes of the top one percent within countries. We discuss conceptual and methodological issues – including alternative definitions of the global distribution, the use of household surveys and national accounts data, the use of purchasing power parity exchange rates, and the incorporation of recently available data on top incomes from income tax records. We also review recent attempts to estimate the global distribution of income. Our own estimates combine household survey data with top income data, and we analyze various aspects of this distribution, including its within- and between-country components, and changes in relative versus absolute global inequality. Finally, we examine global poverty, which is identified through the lower end of the global distribution.
89 citations
Additional excerpts
...are typically much better than surveys at capturing capital income, this varies depending on the extent to which capital income is taxed and hence reported in the tax records (Atkinson et al., 2011, p. 35). Alvaredo and Londoño Vélez’s (2013) study of top incomes in Colombia notes that different definitions of the control income, of which top incomes are expressed as a share, lead to somewhat different estimates....
[...]
References
More filters
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]....
[...]
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...
[...]
TL;DR: JSTOR as discussed by the authors is a not-for-profit organization founded in 1995 to build trusted digital archives for scholarship, which is used to preserve their work and the materials they rely upon, and to build a common research platform that promotes the discovery and use of these resources.
Abstract: you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit organization founded in 1995 to build trusted digital archives for scholarship. We work with the scholarly community to preserve their work and the materials they rely upon, and to build a common research platform that promotes the discovery and use of these resources. For more information about JSTOR, please contact support@jstor.org.
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