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Interactions inequality-polarization: an impossibility result

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Abstract

Recent literature stresses the multidimensional nature of income distribution. Two of the most relevant components are inequality and polarization. In this paper, we prove the impossibility of keeping simultaneously constant these two aspects whenever the distribution of incomes changes. Distributional change could originate from any economic policy or simply from economic growth. Hence, our result implies an effective restriction for policymakers that they cannot avoid and should not ignore. Our proof embodies a general view of polarization that includes the Wolfson and the Esteban and Ray approaches. The paper also develops other links for the case of controlling only one variable and deducing the implications for the other variable.

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File URL: http://public.centrodeestudiosandaluces.es/pdfs/E200464.pdf
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Paper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2004/64.

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Length: 30 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:cea:doctra:e2004_64

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Keywords: polarization; inequality; economic policy.;

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  1. Conchita D'Ambrosio & Edward N. Wolff, . "Is Wealth Becoming More Polarized in the United States?," Economics Working Paper Archive wp_330, Levy Economics Institute.
  2. Davies, James B. & Hoy, Michael, 2002. "Flat rate taxes and inequality measurement," Journal of Public Economics, Elsevier, vol. 84(1), pages 33-46, April.
  3. Davies, J. B. & Shorrocks, A. F., 1989. "Optimal grouping of income and wealth data," Journal of Econometrics, Elsevier, vol. 42(1), pages 97-108, September.
  4. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
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