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Unit-Consistent Decomposable Inequality Measures

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  • BUHONG ZHENG
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    Abstract

    This paper introduces a new axiom-the unit consistency axiom-into inequality measurement. This new axiom requires the ordinal inequality rankings (rather than the cardinal indices) to be unaffected when incomes are expressed in different units. I argue that unit consistency is an indispensable axiom for the measurement of income inequality. When unit consistency is combined with decomposability, I show that the unit-consistent decomposable class of inequality measures is a two-parameter extension of the one-parameter generalized entropy class. The extended class accommodates a variety of value judgments and includes different types of inequality measures. Copyright (c) The London School of Economics and Political Science 2006.

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    Bibliographic Info

    Article provided by London School of Economics and Political Science in its journal Economica.

    Volume (Year): 74 (2007)
    Issue (Month): 293 (02)
    Pages: 97-111

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    Handle: RePEc:bla:econom:v:74:y:2007:i:293:p:97-111

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    Cited by:
    1. Dasgupta, Indraneel & Kanbur, Ravi, 2007. "Should Egalitarians Expropriate Philanthropists?," CEPR Discussion Papers 6362, C.E.P.R. Discussion Papers.
    2. M-super-a Casilda Lasso de la Vega & Ana Urrutia & Henar Díez, 2010. "Unit Consistency And Bipolarization Of Income Distributions," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(1), pages 65-83, 03.
    3. Francisco Azpitarte & Olga Alonso-Villar, 2012. "A Dominance Criterion for Measuring Income Inequality from a Centrist View: The Case of Australia," Melbourne Institute Working Paper Series wp2012n03, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    4. Kjellsson, Gustav & Gerdtham, Ulf-G., 2013. "Lost in Translation: Rethinking the Inequality-Equivalence Criteria for Bounded Health Variables," Working Papers 2013:18, Lund University, Department of Economics, revised 02 Jan 2014.
    5. Buhong Zheng, 2007. "Inequality orderings and unit consistency," Social Choice and Welfare, Springer, vol. 29(3), pages 515-538, October.
    6. Allanson, Paul & Petrie, Dennis, 2012. "Understanding the vertical equity judgements underpinning health inequality measures," SIRE Discussion Papers 2012-06, Scottish Institute for Research in Economics (SIRE).
    7. Lasso de la Vega, Casilda & Aristondo, Oihana, 2012. "Proposing indicators to measure achievement and shortfall inequality consistently," Journal of Health Economics, Elsevier, vol. 31(4), pages 578-583.
    8. M. Lasso de la Vega & Ana Urrutia, 2011. "Characterizing how to aggregate the individuals’ deprivations in a multidimensional framework," Journal of Economic Inequality, Springer, vol. 9(2), pages 183-194, June.
    9. de la Vega, Casilda Lasso & Seidl, Christian, 2007. "The Impossibility of a Just Pigouvian," Economics Working Papers 2007,10, Christian-Albrechts-University of Kiel, Department of Economics.
    10. Lambert, Peter & Zheng, Buhong, 2011. "On the consistent measurement of attainment and shortfall inequality," Journal of Health Economics, Elsevier, vol. 30(1), pages 214-219, January.
    11. Beckman, Steve & James Smith, W. & Zheng, Buhong, 2009. "Measuring inequality with interval data," Mathematical Social Sciences, Elsevier, vol. 58(1), pages 25-34, July.
    12. Coral del Río & Olga Alonso-Villar, 2007. "Rankings of Income Distributions: A Note on Intermediate Inequality Indices," Working Papers 68, ECINEQ, Society for the Study of Economic Inequality.
    13. Indraneel Dasgupta & Ravi Kanbur, 2011. "Does philanthropy reduce inequality?," Journal of Economic Inequality, Springer, vol. 9(1), pages 1-21, March.
    14. Satya Chakravarty & Swami Tyagarupananda, 2009. "The subgroup decomposable intermediate indices of inequality," Spanish Economic Review, Springer, vol. 11(2), pages 83-97, June.
    15. Mª Casilda Lasso de la Vega & Ana Urrutia & Henar Diez, 2009. "The Bourguignon and Chakravarty multidimensional poverty family: A characterization," Working Papers 109, ECINEQ, Society for the Study of Economic Inequality.

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