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Distributional change, reference groups and the measurement of relative deprivation

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  • Jacques Silber

    (Bar-Ilan University)

  • Paolo Verme

    ()
    (University of Torino and School of Management SDA Bocconi)

Abstract

This paper attempts to explicitly integrate the idea of reference group when measuring relative deprivation. It assumes that in assessing her situation in society an individual compares herself with individuals whose environment can be considered as being similar to hers. By environment we mean the set of people with a similar set of observable characteristics such as human capital, household attributes and location. We therefore propose to measure relative deprivation by comparing the actual income of an individual with the one he could have expected on the basis of the level of these characteristics. We then aggregate these individual comparisons by computing an index of "distributional change" that compares, on a non anonymous basis, the distributions of the actual and "expected" incomes. At the difference of other approaches to relative deprivation our measure takes into account not only the difference between the actual and "expected" individual incomes but also that between the actual and "expected" individual ranks. We applied our approach to Moldova, the poorest country in Europe, using a survey which covered a period of six years (from 2000 to 2005). We then observed that our measure of deprivation, when compared to other possible measures of deprivation, had a higher correlation with the answers given by individuals in the survey we used to a question on their assessment of their housing living conditions (a higher number corresponding to a worse subjective situation).

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File URL: http://www.ecineq.org/milano/WP/ECINEQ2009-136.pdf
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Bibliographic Info

Paper provided by ECINEQ, Society for the Study of Economic Inequality in its series Working Papers with number 136.

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Length: 31 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:inq:inqwps:ecineq2009-136

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Keywords: deprivation; reference groups; and inequality.;

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  1. Hey, John D & Lambert, Peter J, 1980. "Relative Deprivation and the Gini Coefficient: Comment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 95(3), pages 567-73, November.
  2. Bossert, Walter & D'Ambrosio, Conchita, 2006. "Reference groups and individual deprivation," Economics Letters, Elsevier, Elsevier, vol. 90(3), pages 421-426, March.
  3. Clark, Andrew E. & Oswald, Andrew J., 1996. "Satisfaction and comparison income," Journal of Public Economics, Elsevier, Elsevier, vol. 61(3), pages 359-381, September.
  4. Silber, Jacques, 1989. "Factor Components, Population Subgroups and the Computation of the Gini Index of Inequality," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 107-15, February.
  5. World Bank, 2004. "Recession, Recovery and Poverty in Moldova," World Bank Other Operational Studies 14424, The World Bank.
  6. Mercedes Sastre & Alain Trannoy, 2002. "Shapley inequality decomposition by factor components: Some methodological issues," Journal of Economics, Springer, Springer, vol. 9(1), pages 51-89, December.
  7. Berrebi, Z M & Silber, Jacques, 1985. "Income Inequality Indices and Deprivation: A Generalization [Relative Deprivation and the Gini Coefficient]," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(3), pages 807-10, August.
  8. Cowell, Frank A., 1980. "Generalized entropy and the measurement of distributional change," European Economic Review, Elsevier, Elsevier, vol. 13(1), pages 147-159, January.
  9. Ravallion, Martin & Shaohua Chen, 2001. "Measuring pro-poor growth," Policy Research Working Paper Series 2666, The World Bank.
  10. Verme, Paolo, 2008. "Social assistance and poverty reduction in Moldova, 2001-2004 an impact evaluation," Policy Research Working Paper Series 4658, The World Bank.
  11. Fields, Gary S. & Ok, Efe A., 1996. "The Measurement of Income Mobility: An Introduction to the Literature," Working Papers, C.V. Starr Center for Applied Economics, New York University 96-05, C.V. Starr Center for Applied Economics, New York University.
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Cited by:
  1. Paolo Verme, 2010. "Happiness, deprivation and the alter ego," Working Papers 155, ECINEQ, Society for the Study of Economic Inequality.
  2. Luna Bellani, 2013. "Multidimensional indices of deprivation: the introduction of reference groups weights," Journal of Economic Inequality, Springer, Springer, vol. 11(4), pages 495-515, December.
  3. Verme, Paolo, 2013. "The relative income and relative deprivation hypotheses : a review of the empirical literature," Policy Research Working Paper Series 6606, The World Bank.

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