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On Comparing Heterogenous Populations: is there really a Conflict between the Pareto Criterion and Inequality Aversion?

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  • Bart Chapeau
  • Erwin Ooghe

Abstract

The incompatibility between the Pareto indifference criterion and a concern for greater equality in living standards of heterogenous populations (see, amongst others, Ebert, 1995, 1997, Ebert and Moyes, 2003 and Shorrocks, 1995) might come as a surprise, since both principles are reconcilable when people differ only in income (homogenous population). We present two families of welfare rankings --(i) single parameter extensions of the generalized Lorenz dominance rule and (ii) a subset of Weymark's (1981) generalized Ginis-- and show how and why these rules resolve the paradox.

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Bibliographic Info

Paper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces0407.

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Date of creation: Mar 2004
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Handle: RePEc:ete:ceswps:ces0407

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Keywords: heterogeneity; welfare comparisons.;

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Cited by:
  1. Bart Capéau & Erwin Ooghe, 2004. "On the reconciliation of efficiency and inequality aversion with heterogeneous populations: characterization results," Public Economics Working Paper Series wpeiahp, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.

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