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Robust Inequality Comparisons

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  • Rolf Aaberge
  • Magne Mogstad

    ()
    (Statistics Norway)

Abstract

This paper is concerned with the problem of ranking Lorenz curves in situations where the Lorenz curves intersect and no unambiguous ranking can be attained without introducing weaker ranking criteria than first-degree Lorenz dominance. To deal with such situations Aaberge (2009) introduced two alternative sequences of nested dominance criteria for Lorenz curves which was proved to characterize two separate systems of nested subfamilies of inequality measures. This paper uses the obtained characterization results to arrange the members of two different generalized Gini families of inequality measures into subfamilies according to their relationship to Lorenz dominance of various degrees. Since the various criteria of higher degree Lorenz dominance provide convenient computational methods, these results can be used to identify the largest subfamily of the generalized Gini families and thus the least restrictive social preferences required to reach unambiguous ranking of a set of Lorenz curves. From the weight-functions of these inequality measures we obtain intuitive interpretations of higher degree Lorenz dominance, which generally has been viewed as difficult to interpret because they involve assumptions about third and higher derivatives. To demonstrate the usefulness of these methods for empirical applications, we examine the time trend in income and earnings inequality of Norwegian males during the period 1967-2005.

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Bibliographic Info

Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 623.

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Date of creation: Jun 2010
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Handle: RePEc:ssb:dispap:623

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Keywords: The Lorenz curve; Lorenz dominance; rank-dependent measures of inequality; the Gini coefficient; generalized Gini families of inequality measures.;

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References

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  1. Atkinson, A. B. & Piketty, Thomas (ed.), 2010. "Top Incomes: A Global Perspective," OUP Catalogue, Oxford University Press, number 9780199286898.
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  3. Shorrocks, Anthony F & Foster, James E, 1987. "Transfer Sensitive Inequality Measures," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 485-97, July.
  4. Almås, Ingvild & Havnes, Tarjei & Mogstad, Magne, 2011. "Baby Booming Inequality? Demographic Change and Inequality in Norway, 1967{2004," Discussion Paper Series in Economics 6/2010, Department of Economics, Norwegian School of Economics.
  5. Erik Fjærli & Rolf Aaberge, 2000. "Tax Reforms, Dividend Policy and Trends in Income Inequality Empirical Evidence based on Norwegian Data," Discussion Papers 284, Research Department of Statistics Norway.
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  9. Aaberge, Rolf & Bhuller, Manudeep & Langørgen, Audun & Mogstad, Magne, 2010. "The Distributional Impact of Public Services When Needs Differ," IZA Discussion Papers 4826, Institute for the Study of Labor (IZA).
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  12. Ingvild Almås & Tarjei Havnes & Magne Mogstad, 2011. "Baby booming inequality? Demographic change and earnings inequality in Norway, 1967–2000," Journal of Economic Inequality, Springer, vol. 9(4), pages 629-650, December.
  13. A. Atkinson, 2008. "More on the measurement of inequality," Journal of Economic Inequality, Springer, vol. 6(3), pages 277-283, September.
  14. DONALDSON, David & WEYMARK, John A., . "Ethically flexible Gini indices for income distributions in the continuum," CORE Discussion Papers RP -520, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  15. 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.
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  22. A. Atkinson, 2003. "Multidimensional Deprivation: Contrasting Social Welfare and Counting Approaches," Journal of Economic Inequality, Springer, vol. 1(1), pages 51-65, April.
  23. Muliere, Pietro & Scarsini, Marco, 1989. "A note on stochastic dominance and inequality measures," Journal of Economic Theory, Elsevier, vol. 49(2), pages 314-323, December.
  24. Rolf Aaberge & Anthony B. Atkinson, 2008. "Top Incomes in Norway," Discussion Papers 552, Research Department of Statistics Norway.
  25. Mehran, Farhad, 1976. "Linear Measures of Income Inequality," Econometrica, Econometric Society, vol. 44(4), pages 805-09, July.
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Cited by:
  1. Ingvild Almås & Tarjei Havnes & Magne Mogstad, 2011. "Baby booming inequality? Demographic change and earnings inequality in Norway, 1967–2000," Journal of Economic Inequality, Springer, vol. 9(4), pages 629-650, December.

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