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Making Amartya Sen’s Capability Approach Operational: A Random Scale Framework for Empirical Modeling

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Amartya Sen has developed the so-called capability approach to take account of the view that income on its own is not enough to measure economic inequality. This is because knowledge about people’s income does not tell us what they are able to acquire with that income. For example, people with the same income may not have access to health and transportation services, schools and opportunities in the labor market. Recently, there has been growing interest in empirical studies based on the capability approach. Most of these, however, are only loosely related to quantitative behavioral microeconomic theory, at least in a concrete and empirically operational way. The purpose of this paper is to demonstrate that the theory of random scale (utility) models (RSM) offers a suitable and powerful framework for representing and accounting for some key aspects of Sen’s theory. In this paper we reinterpret the concepts Sen has proposed within the RSM framework, with particular reference to representations that are operational in empirical contexts.

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Paper provided by University of Turin in its series Department of Economics and Statistics Cognetti de Martiis. Working Papers with number 201005.

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Length: 26 pages
Date of creation: May 2010
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Handle: RePEc:uto:dipeco:201005

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  1. Joseph A. Herriges & Catherine L. Kling, 1999. "Nonlinear Income Effects in Random Utility Models," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 62-72, February.
  2. McFadden, Daniel L., 2000. "Economic Choices," Nobel Prize in Economics documents 2000-6, Nobel Prize Committee.
  3. Herwaarden, F.G. van & Kapteyn, A.J., 1981. "Empirical comparison of the shape of welfare functions," Open Access publications from Tilburg University urn:nbn:nl:ui:12-364298, Tilburg University.
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  5. van Praag, Bernard M. S. & Kapteyn, Arie, 1994. "How sensible is the Leyden individual welfare function of income? A reply," European Economic Review, Elsevier, vol. 38(9), pages 1817-1825, December.
  6. John K. Dagsvik & Steinar Strøm & Zhiyang Jia, 2005. "Utility of Income as a Random Function. Behavioral Characterization and Empirical Evidence," Discussion Papers 431, Research Department of Statistics Norway.
  7. Dagsvik, John K, 1994. "Discrete and Continuous Choice, Max-Stable Processes, and Independence from Irrelevant Attributes," Econometrica, Econometric Society, vol. 62(5), pages 1179-1205, September.
  8. McFadden, Daniel L., 1984. "Econometric analysis of qualitative response models," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 24, pages 1395-1457 Elsevier.
  9. James J. Heckman & Christopher J. Flinn, 1982. "New Methods for Analyzing Structural Models of Labor Force Dynamics," NBER Working Papers 0856, National Bureau of Economic Research, Inc.
  10. Paul Anand & Graham Hunter & Ron Smith, 2005. "Capabilities and Well-Being: Evidence Based on the Sen–Nussbaum Approach to Welfare," Social Indicators Research, Springer, vol. 74(1), pages 9-55, October.
  11. Seidl, Christian, 1994. "How sensible is the Leyden individual welfare function of income?," European Economic Review, Elsevier, vol. 38(8), pages 1633-1659, October.
  12. Van Praag, Bernard, 1971. "The welfare function of income in Belgium: An empirical investigation," European Economic Review, Elsevier, vol. 2(3), pages 337-369.
  13. van Praag, Bernard M. S., 1991. "Ordinal and cardinal utility : An integration of the two dimensions of the welfare concept," Journal of Econometrics, Elsevier, vol. 50(1-2), pages 69-89, October.
  14. Sen, Amartya, 1997. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198292975, October.
  15. Paul Anand & Cristina Santos & Ron Smith, 2007. "The measurement of capabilities," Open Discussion Papers in Economics 67, The Open University, Faculty of Social Sciences, Department of Economics.
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