This paper analyzes the relationship between bipolarization and inequality, welfare and poverty measures. First, we clarify the similarities and differences between bipolarization and inequality measures. Second, it is shown that bipolarization is the difference between the welfare levels of the richer and poorer income groups when feelings of identification between individuals are based on their utility functions. In fact, bipolarization is interpreted as the welfare of the richer group that is wasted to compensate for income bipolarization. Third, a relationship between bipolarization measurement and the normalized poverty deficit index is established. These findings are applied to the polarization measures of Wolfson (1994), Esteban and Ray (1994) and Lasso de la Vega and Urrutia (2006).
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Paper provided by ECINEQ, Society for the Study of Economic Inequality in its series Working Papers with number
39.
Find related papers by JEL classification: D39 - Microeconomics - - Distribution - - - Other D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
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