On comparing heterogeneous populations: Is there really a conflict between the Pareto criterion and inequality aversion?
AbstractThe incompatibility between the Pareto indifference criterion and a concern for greater equality in living standards of heterogenous populations (see, amongst others, Ebert, 1995, 1997, Ebert and Moyes, 2003 and Shorrocks, 1995) might come as a surprise, since both principles are reconcilable when people differ only in income (homogenous population). We present two families of welfare rankings --(i) single parameter extensions of the generalized Lorenz dominance rule and (ii) a subset of Weymark's (1981) generalized Ginis-- and show how and why these rules resolve the paradox.
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Bibliographic InfoPaper provided by Katholieke Universiteit Leuven in its series Open Access publications from Katholieke Universiteit Leuven with number urn:hdl:123456789/121548.
Date of creation: 2004
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Heterogeneity; Welfare comparisons;
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- Hammond, Peter J., 1975. "A note on extreme inequality aversion," Journal of Economic Theory, Elsevier, vol. 11(3), pages 465-467, December.
- Udo Ebert & Patrick Moyes, 2003. "Equivalence Scales Reconsidered," Econometrica, Econometric Society, vol. 71(1), pages 319-343, January.
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- Bart Capéau & Erwin Ooghe, 2004. "On the reconciliation of efficiency and inequality aversion with heterogeneous populations: characterization results," Public Economics Working Paper Series wpeiahp, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.
- Decoster, André & Ooghe, Erwin, 2005. "A bounded index test for robust heterogeneous welfare comparisons," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/119318, Katholieke Universiteit Leuven.
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