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Poverty And Inequality Under Income And Price Dispersions

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Author Info
Christophe Muller () (Universidad de Alicante)

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Abstract

Many policies simultaneously affect the distribution of prices and incomes in the economy. Moreover, a bias may occur when there is a stochastic relationship between prices and incomes and this relationship is being ignored. It is therefore important to dispose of an analytical framework for welfare analysis that could account for changes in this joint distribution. How can the joint influences of price and income distributions on poverty and inequality indicators be analysed? We offer a method to deal with this problem by using parametric formulae of poverty and inequality measures. We propose statistical indicators for the levels, variabilities and a statistical link of price indices and nominal living standards. These indicators are consistent with an approximation of the problem based on a bivariate lognormal distribution of price indices and nominal living standards. Our analysis provides hints about the social welfare impact of economic shocks or policies affecting levels, variabilities and correlation of prices and incomes. Intuitive insights are obtained, while using arithmetic means and variances instead does not lead to illuminating results. The role of price and income variabilities for poverty and inequality is more complex than generally expected, with the possibility of several variation regimes. Empirical investigation of these statistics would guide social policies.

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Publisher Info
Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2004-35.

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Length: 22 pages
Date of creation: Aug 2004
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Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2004-35

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Keywords: Strategy-proofness; public goods economies; differentiable mechanisms;

Other versions of this item:

Find related papers by JEL classification:
D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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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.:
  1. Muller, Christophe, 2002. "Prices and living standards: evidence for Rwanda," Journal of Development Economics, Elsevier, vol. 68(1), pages 187-203, June. [Downloadable!] (restricted)
  2. van Praag, Bernard M S & Hagenaars, Aldi J M & van Eck, Wim, 1983. "The Influence of Classification and Observation Errors on the Measurement of Income Inequality," Econometrica, Econometric Society, vol. 51(4), pages 1093-108, July. [Downloadable!] (restricted)
  3. Kloek, Teun & van Dijk, Herman K., 1978. "Efficient estimation of income distribution parameters," Journal of Econometrics, Elsevier, vol. 8(1), pages 61-74, August. [Downloadable!] (restricted)
  4. Christophe Muller, 2005. "Poverty and inequality under income and price dispersions," Canadian Journal of Economics, Canadian Economics Association, vol. 38(3), pages 979-998, August. [Downloadable!] (restricted)
    Other versions:
  5. Bourguignon, Francois & de Melo, Jaime & Morrisson, Christian, 1991. "Poverty and income distribution during adjustment : issues and evidence from the OECD project," Policy Research Working Paper Series 810, The World Bank. [Downloadable!]
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  6. Chipman, John S., 1974. "The welfare ranking of Pareto distributions," Journal of Economic Theory, Elsevier, vol. 9(3), pages 275-282, November. [Downloadable!] (restricted)
  7. Eaton, Jonathan, 1980. "Price Variability, Utility and Savings," Review of Economic Studies, Blackwell Publishing, vol. 47(3), pages 513-20, April. [Downloadable!] (restricted)
  8. James E. Foster & Efe A. Ok, 1999. "Lorenz Dominance and the Variance of Logarithms," Econometrica, Econometric Society, vol. 67(4), pages 901-908, July.
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  9. Salem, A B Z & Mount, T D, 1974. "A Convenient Descriptive Model of Income Distribution: The Gamma Density," Econometrica, Econometric Society, vol. 42(6), pages 1115-27, November. [Downloadable!] (restricted)
  10. Shorrocks, Anthony F, 1995. "Revisiting the Sen Poverty Index," Econometrica, Econometric Society, vol. 63(5), pages 1225-30, September. [Downloadable!] (restricted)
  11. Singh, S K & Maddala, G S, 1976. "A Function for Size Distribution of Incomes," Econometrica, Econometric Society, vol. 44(5), pages 963-70, September. [Downloadable!] (restricted)
  12. Hirschberg, Joseph G. & Slottje, D. J., 1989. "Remembrance of things past the distribution of earnings across occupations and the kappa criterion," Journal of Econometrics, Elsevier, vol. 42(1), pages 121-130, September. [Downloadable!] (restricted)
  13. Christophe Muller, 2001. "The Properties of the Watts Poverty Index under Lognormality," Economics Bulletin, Economics Bulletin, vol. 9, pages 1-9. [Downloadable!]
  14. Duncan, Alex & Jones, Stephen, 1993. "Agricultural marketing and pricing reform: A review of experience," World Development, Elsevier, vol. 21(9), pages 1495-1514, September. [Downloadable!] (restricted)
  15. Rao, Vijayendra, 2000. "Price Heterogeneity and "Real" Inequality: A Case Study of Prices and Poverty in Rural South India," Review of Income and Wealth, Blackwell Publishing, vol. 46(2), pages 201-11, June.
  16. Kuan Xu & Lars Osberg, 2002. "The social welfare implications, decomposability, and geometry of the Sen family of poverty indices," Canadian Journal of Economics, Canadian Economics Association, vol. 35(1), pages 138-152, February. [Downloadable!] (restricted)
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  17. Creedy, John & Martin, Vance L, 1994. "A Model of the Distribution of Prices," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 56(1), pages 67-76, February.
  18. Maasoumi, Esfandiar, 1989. "Continuously distributed attributes and measures of multivariate inequality," Journal of Econometrics, Elsevier, vol. 42(1), pages 131-144, September. [Downloadable!] (restricted)
  19. Slottje, Daniel J., 1984. "A measure of income inequality in the U.S. for the years 1952-1980 based on the beta distribution of the second kind," Economics Letters, Elsevier, vol. 15(3-4), pages 369-375. [Downloadable!] (restricted)
  20. Slesnick, Daniel T, 1993. "Gaining Ground: Poverty in the Postwar United States," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 1-38, February. [Downloadable!] (restricted)
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(explanations, 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.)

  1. Christophe Muller, 2004. "Poverty And Inequality Under Income And Price Dispersions," Working Papers. Serie AD 2004-35, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
    Other versions:
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