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Measuring Economic Insecurity

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  • WALTER BOSSERT
  • CONCHITA D'AMBROSIO

Abstract

We provide an axiomatic treatment of the measurement of economic insecurity, assuming that individual insecurity depends on the current wealth level and its variations experienced in the past. The first component plays the role of a buffer stock to rely on in case of an adverse future event. The second component determines the confidence an individual has on her ability to overcome a loss in the future. Two classes of linear measures are characterized with sets of plausible and intuitive axioms and, for each of these classes, an important subclass is identified.

Suggested Citation

  • Walter Bossert & Conchita D'Ambrosio, 2013. "Measuring Economic Insecurity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(3), pages 1017-1030, August.
    • Handle: RePEc:wly:iecrev:v:54:y:2013:i:3:p:1017-1030
    DOI: 10.1111/iere.12026
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    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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