Advanced Search
MyIDEAS: Login

On the measurement of long-term income inequality and income mobility

Contents:

Author Info

  • Rolf Aaberge

    ()
    (Research Department, Statistics Norway)

  • Magne Mogstad

    (Research Department, Statistics Norway)

Abstract

This paper proposes a two-step aggregation method for measuring long-term income inequality and income mobility, where mobility is defined as an equalizer of long-term income. The first step consists of aggregating the income stream of each individual into a measure of permanent income, which accounts for the costs associated with income fluctuations and allows for credit market imperfections. The second step aggregates permanent incomes across individuals into measures of social welfare, inequality and mobility. To this end, we employ an axiomatic approach to justify the introduction of a generalized family of rank-dependent measures of inequality, where the distributional weights, as opposed to the Mehran-Yaari family, depend on income shares as well as on population shares. Moreover, a subfamily is shown to be associated with social welfare functions that have intuitively appealing interpretations. Further, the generalized family of inequality measures provides new interpretations of the Gini-coefficient.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.ecineq.org/milano/WP/ECINEQ2010-156.pdf
Download Restriction: no

Bibliographic Info

Paper provided by ECINEQ, Society for the Study of Economic Inequality in its series Working Papers with number 156.

as in new window
Length: 37 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:inq:inqwps:ecineq2010-156

Contact details of provider:
Email:
Web page: http://www.ecineq.org
More information through EDIRC

Related research

Keywords: Income inequality; income mobility; social welfare; the Gini coefficient; permanent income; credit market; annuity.;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Porath Elchanan Ben & Gilboa Itzhak, 1994. "Linear Measures, the Gini Index, and The Income-Equality Trade-off," Journal of Economic Theory, Elsevier, vol. 64(2), pages 443-467, December.
  2. Costas Meghir, 2004. "A retrospective on Friedman's theory of permanent income," IFS Working Papers W04/01, Institute for Fiscal Studies.
  3. Segal, Uzi, 1990. "Two-Stage Lotteries without the Reduction Axiom," Econometrica, Econometric Society, vol. 58(2), pages 349-77, March.
  4. Peter Gottschalk & Enrico Spolare, 2001. "On the Evaluation of Economic Mobility," Working Papers 2001-25, Brown University, Department of Economics.
  5. Richard V. Burkhauser & John G. Poupore, 1997. "A Cross-National Comparison Of Permanent Inequality In The United States And Germany," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 10-17, February.
  6. Weymark, John A., 1981. "Generalized gini inequality indices," Mathematical Social Sciences, Elsevier, vol. 1(4), pages 409-430, August.
  7. Gustafsson, Bjorn, 1994. "The Degree and Pattern of Income Immobility in Sweden," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 40(1), pages 67-86, March.
  8. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
  9. Green, Jerry R & Jullien, Bruno, 1988. " Ordinal Independence in Nonlinear Utility Theory," Journal of Risk and Uncertainty, Springer, vol. 1(4), pages 355-87, December.
  10. Roland Bénabou & Efe A. Ok, 2000. "Mobility as Progressivity: Ranking Income Processes According to Equality of Opportunity," Working Papers 150, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
  11. Fields, Gary S & Fei, John C H, 1978. "On Inequality Comparisons," Econometrica, Econometric Society, vol. 46(2), pages 303-16, March.
  12. Rolf Aaberge, 2009. "Ranking intersecting Lorenz curves," Social Choice and Welfare, Springer, vol. 33(2), pages 235-259, August.
  13. Donaldson, David & Weymark, John A., 1980. "A single-parameter generalization of the Gini indices of inequality," Journal of Economic Theory, Elsevier, vol. 22(1), pages 67-86, February.
  14. Donaldson, David & Weymark, John A., 1983. "Ethically flexible gini indices for income distributions in the continuum," Journal of Economic Theory, Elsevier, vol. 29(2), pages 353-358, April.
  15. Yaari, Menahem E., 1988. "A controversial proposal concerning inequality measurement," Journal of Economic Theory, Elsevier, vol. 44(2), pages 381-397, April.
  16. Aaberge, Rolf & Colombino, Ugo & Strøm, Steinar, 2003. "Do More Equal Slices Shrink the Cake? An Empirical Investigation of Tax-Transfer Reform Proposals in Italy," Memorandum 37/2003, Oslo University, Department of Economics.
  17. Valentino Dardanoni & Marcello D’Agostino, 2007. "The Measurement of Rank Mobility," Working Papers 80, ECINEQ, Society for the Study of Economic Inequality.
  18. Kahneman, Daniel & Wakker, Peter P & Sarin, Rakesh, 1997. "Back to Bentham? Explorations of Experienced Utility," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 375-405, May.
  19. Shorrocks, Anthony, 1978. "Income inequality and income mobility," Journal of Economic Theory, Elsevier, vol. 19(2), pages 376-393, December.
  20. Yitzhaki, Shlomo, 1983. "On an Extension of the Gini Inequality Index," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(3), pages 617-28, October.
  21. Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January.
  22. Aaberge, Rolf & Björklund, Anders & Jäntti, Markus & Palme, Mårten & Pedersen, Peder & Smith, Nina & Wennemo, Tom, 1996. "Income Inequality and Income Mobility in the Scandinavian Countries Compared to the United States," Working Paper Series in Economics and Finance 98, Stockholm School of Economics, revised Aug 2002.
  23. Nordhaus, William D, 1973. "The Effects of Inflation on the Distribution of Economic Welfare," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 5(1), pages 465-504, Part II F.
  24. repec:ese:iserwp:2002-26 is not listed on IDEAS
  25. Fields, Gary S. & Ok, Efe A., 1996. "The Meaning and Measurement of Income Mobility," Journal of Economic Theory, Elsevier, vol. 71(2), pages 349-377, November.
  26. Kolm, Serge-Christophe, 1976. "Unequal inequalities. II," Journal of Economic Theory, Elsevier, vol. 13(1), pages 82-111, August.
  27. Javier Ruiz-Castillo, 2004. "The measurement of structural and exchange income mobility," Journal of Economic Inequality, Springer, vol. 2(3), pages 219-228, September.
  28. Esfandiar Maasoumi & Mark Trede, 2001. "Comparing Income Mobility In Germany And The United States Using Generalized Entropy Mobility Measures," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 551-559, August.
  29. Dardanoni Valentino, 1993. "Measuring Social Mobility," Journal of Economic Theory, Elsevier, vol. 61(2), pages 372-394, December.
  30. Ayala, L. & Sastre, M., 2002. "Europe vs. The United States: Is There a Trade-Off Between Mobility and Inequality?," European Economy Group Working Papers 19, European Economy Group.
  31. Aaberge, Rolf, 2001. "Axiomatic Characterization of the Gini Coefficient and Lorenz Curve Orderings," Journal of Economic Theory, Elsevier, vol. 101(1), pages 115-132, November.
  32. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
  33. Rolf Aaberge, 2000. "Characterizations of Lorenz curves and income distributions," Social Choice and Welfare, Springer, vol. 17(4), pages 639-653.
  34. Joan R. Rodgers & John L. Rodgers, 1993. "Chronic Poverty in the United States," Journal of Human Resources, University of Wisconsin Press, vol. 28(1), pages 25-54.
  35. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
  36. Maasoumi, Esfandiar & Zandvakili, Sourushe, 1986. "A class of generalized measures of mobility with applications," Economics Letters, Elsevier, vol. 22(1), pages 97-102.
  37. Kolm, Serge-Christophe, 1976. "Unequal inequalities. I," Journal of Economic Theory, Elsevier, vol. 12(3), pages 416-442, June.
  38. Ebert, Udo, 1987. "Size and distribution of incomes as determinants of social welfare," Journal of Economic Theory, Elsevier, vol. 41(1), pages 23-33, February.
  39. Maasoumi, Esfandiar & Zandvakili, Sourushe, 1990. "Generalized entropy measures of mobility for different sexes and income levels," Journal of Econometrics, Elsevier, vol. 43(1-2), pages 121-133.
  40. Mehran, Farhad, 1976. "Linear Measures of Income Inequality," Econometrica, Econometric Society, vol. 44(4), pages 805-09, July.
  41. Tjalling C. Koopmans, 1959. "Stationary Ordinal Utility and Impatience," Cowles Foundation Discussion Papers 81, Cowles Foundation for Research in Economics, Yale University.
  42. Quiggin, John, 1990. "Stochastic Dominance in Regret Theory," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 503-11, July.
  43. Davies, James B. & Shorrocks, Anthony F., 2000. "The distribution of wealth," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 11, pages 605-675 Elsevier.
  44. King, Mervyn A., 1983. "Welfare analysis of tax reforms using household data," Journal of Public Economics, Elsevier, vol. 21(2), pages 183-214, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Rolf Aaberge & Magne Mogstad & Vito Peragine, 2010. "Measuring long-term inequality of opportunity," Working Papers 158, ECINEQ, Society for the Study of Economic Inequality.
  2. John Creedy & Elin Halvorsen & Thor O. Thoresen, 2013. "Inequality Comparisons In A Multi-Period Framework: The Role Of Alternative Welfare Metrics," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 59(2), pages 235-249, 06.
  3. Sami Bibi & Jean-Yves Duclos & Abdelkrim Araar, 2014. "Mobility, taxation and welfare," Social Choice and Welfare, Springer, vol. 42(3), pages 503-527, March.
  4. Rolf Aaberge & A B Atkinson, 2013. "The median as watershed," Discussion Papers 749, Research Department of Statistics Norway.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:inq:inqwps:ecineq2010-156. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maria Ana Lugo).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.