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Empirical Welfare Analysis: When Preferences Matter

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  • Jean-François Carpantier

    ()
    (CREA, University of Luxembourg)

  • Christelle Sapata

    ()
    (Facultés Universitaires de Saint Louis, Bruxelles)

Abstract

Fleurbaey and Maniquet have proposed the criteria of conditional equality and of egalitarian equivalence to assess the equity among individuals in an ordinal setting. Empirical applications are rare and only partially consistent with their framework. We propose a new empirical approach that relies on individual preferences, is consistent with the ordinal criteria and enables to compare them with the cardinal criteria. We estimate a utility function that incorporates individual heterogeneous preferences, obtain ordinal measures of well-being and apply conditional equality and egalitarian equivalence. We then propose two cardinal measures of well-being, that are comparable with the ordinal model, to compute Roemer’s and Van de gaer’s criteria. Finally we compare the characteristics of the worst-off displayed by each criterion. We apply this model to a sample of US micro data and obtain that about 18% of the worst-off are not common to all criteria.

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Bibliographic Info

Paper provided by Center for Research in Economic Analysis, University of Luxembourg in its series CREA Discussion Paper Series with number 13-11.

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Date of creation: 2013
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Handle: RePEc:luc:wpaper:13-11

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Keywords: Random Utility; Preference Heterogeneity; Welfare; Inequality of Opportunity; Labour Supply;

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  1. Rolf Aaberge & Ugo Colombino & Steinar Strøm, 2004. "Do more equal slices shrink the cake? An empirical investigation of tax-transfer reform proposals in Italy," Journal of Population Economics, Springer, vol. 17(4), pages 767-785, December.
  2. FLEURBAEY, Marc & MANIQUET, François, . "Fair social orderings when agents have unequal production skills," CORE Discussion Papers RP -1805, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Marc Fleurbaey & Francois Maniquet, 2002. "Fair Income Tax," Economics Working Papers 0021, Institute for Advanced Study, School of Social Science.
  4. Fleurbaey, Marc, 2012. "Fairness, Responsibility, and Welfare," OUP Catalogue, Oxford University Press, number 9780199653591, Octomber.
  5. André Decoster & Peter Haan, 2010. "Empirical Welfare Analysis in Random Utility Models of Labour Supply," SOEPpapers on Multidisciplinary Panel Data Research 340, DIW Berlin, The German Socio-Economic Panel (SOEP).
  6. Dirk Van de Gaer & Michel Martinez & Erik Schokkaert, 1998. "Measuring Intergenerational Mobility and Equality of Opportunity," Public Economics Working Paper Series ces9810, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.
  7. RAMOS, Xavier & VAN DE GAER, Dirk, 2012. "Empirical approaches to inequality of opportunity: principles, measures, and evidence," CORE Discussion Papers 2012026, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Almås, Ingvild & Cappelen, Alexander W. & Lind, Jo Thori & Sørensen, Erik Ø. & Tungodden, Bertil, 2011. "Measuring unfair (in)equality," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 488-499, August.
  9. Bonin, Holger & Schneider, Hilmar, 2006. "Analytical prediction of transition probabilities in the conditional logit model," Economics Letters, Elsevier, vol. 90(1), pages 102-107, January.
  10. Marc Fleurbaey & François Maniquet, 2006. "Compensation and responsibility," Working Papers halshs-00121367, HAL.
  11. Marc Fleurbaey & Walter Bossert, 1996. "Redistribution and compensation (*)," Social Choice and Welfare, Springer, vol. 13(3), pages 343-355.
  12. Dirk Van de gaer; & Michel Martinez; & Erik Schokkaert, 1998. "Measuring Intergenerational Mobility and Equality of Opportunity," Economics, Finance and Accounting Department Working Paper Series n780598, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  13. Schokkaert, Erik & Van de gaer, Dirk & Vandenbroucke, Frank & Luttens, Roland Iwan, 2004. "Responsibility sensitive egalitarianism and optimal linear income taxation," Mathematical Social Sciences, Elsevier, vol. 48(2), pages 151-182, September.
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