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A Bounded Index Test to make Robust Heterogeneous Welfare Comparisons

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  • André Decoster
  • Erwin Ooghe

Abstract

Fleurbaey, Hagneré and Trannoy (2003) develop a bounded dominance test to make robust welfare comparisons, which is intermediate between Ebert’s (1999) cardinal dominance criterion – generalized Lorenz dominance applied to household incomes, divided and weighted by an equivalence scale – and Bourguignon’s (1989) ordinal dominance criterion. In this paper, we develop a more complete, but less robust bounded index test, which is intermediate between Ebert’s (1997) cardinal index test – an index applied to household incomes, divided and weighted by the equivalence scale – and a (new) sequential index test – an index applied to household incomes of the most needy only, the most and second most needy only, and so on. We illustrate the power of our test to detect welfare changes in Russia using data of the RLMS-surveys.

Suggested Citation

  • André Decoster & Erwin Ooghe, 2005. "A Bounded Index Test to make Robust Heterogeneous Welfare Comparisons," Working Papers of Department of Economics, Leuven ces0505, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    • Handle: RePEc:ete:ceswps:ces0505
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    Cited by:

    1. Mathieu Faure & Nicolas Gravel, 2017. "Equality among Unequals," Working Papers halshs-01430195, HAL.
    2. Rolf Aaberge & Andrea Brandolini, 2014. "Multidimensional poverty and inequality," Discussion Papers 792, Statistics Norway, Research Department.
    3. Mathieu Faure & Nicolas Gravel, 2021. "Reducing Inequalities Among Unequals," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(1), pages 357-404, February.

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