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Measuring Changes in Multidimensional Inequality - An Empirical Application

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  • Nilsson, Therese

    ()
    (Department of Economics, Lund University)

Abstract

During the past decade there has been a growing opinion of including more than an income perspective in the examination of inequality. As a result a broad theoretical literature on the subject of multidimensional inequality is present. This can mainly be divided into three different parts: item-by-item, non-aggregative and aggregative approach. However, there is hitherto no agreement over the measurement of inequality when each individual or household is characterized by a variety of attributes of wellbeing. In addition, there are less empirical examinations applying a multidimensional perspective to inequality. We apply three existing techniques, one from each of the mentioned strands of the theoretical literature, to the particular question of whether multidimensional inequality increased or decreased in Zambia between 1998 and 2004 using household indicators on expenditures, educational level, health status and land holdings. The purpose is to assess strengths and weaknesses of these theoretical methods in an empirical context and accordingly review their usefulness for measurement and policy analysis. Our examination points to that inequality comparisons taking interrelations between attributes into account repeatedly are at odds with comparisons of independent distributions. Consequently, if employing the item-by-item approach, at minimum, one should check the correlations between welfare distributions. The assessment of the aggregative approach show evidence of that different dimensions of wellbeing compensate and reinforce each other with respect to inequality in an empirical context. However, a majority of the results are very sensitive to the degree of substitution between attributes chosen. Sensitivity analyses and explicitness should thus accompany examinations of this kind. In applying a non-aggregative approach few combinations fulfill the required dominance conditions. Accordingly, generality and less imposed structure come at a cost. We conclude that the empirical usefulness of these existing techniques is reasonable as long as we stay aware of intrinsic weaknesses. Clearly, careful interpretations and analyzes involving more than one technique is constructive to portray multidimensional inequality.

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Bibliographic Info

Paper provided by Lund University, Department of Economics in its series Working Papers with number 2007:14.

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Length: 41 pages
Date of creation: 18 Aug 2007
Date of revision:
Handle: RePEc:hhs:lunewp:2007_014

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Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
Phone: +46 +46 222 0000
Fax: +46 +46 2224613
Web page: http://www.nek.lu.se/en
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Keywords: Multidimensional inequality; inequality indices; stochastic dominance; expenditures; education; health; land holdings; Zambia;

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  1. Chipman, John S., 1977. "An empirical implication of Auspitz-Lieben-Edgeworth-Pareto complementarity," Journal of Economic Theory, Elsevier, vol. 14(1), pages 228-231, February.
  2. Xavier Ramos & Jacques Silber, 2005. "On The Application Of Efficiency Analysis To The Study Of The Dimensions Of Human Development ," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(2), pages 285-309, 06.
  3. Basu, Kaushik & Foster, James E., 1998. "On measuring literacy," Policy Research Working Paper Series 1997, The World Bank.
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  5. Bourguignon, F. & Chakravarty, S.R., 1998. "The Measurement of Multidimensional Poverty," DELTA Working Papers 98-12, DELTA (Ecole normale supérieure).
  6. Jenkins, Stephen P & Lambert, Peter J, 1993. "Ranking Income Distributions When Needs Differ," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 39(4), pages 337-56, December.
  7. Gleb Koshevoy, 1997. "The Lorenz zonotope and multivariate majorizations," Social Choice and Welfare, Springer, vol. 15(1), pages 1-14.
  8. Sahn, David E. & Stifel, David C., 2000. "Poverty Comparisons Over Time and Across Countries in Africa," World Development, Elsevier, vol. 28(12), pages 2123-2155, December.
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