This paper looks at both within country and among country inequality. In the spirit of Dalton[1920] and Atkinson[1970] this paper reports estimates of the welfare loss arising from inequality. The paper also explores the implications of Duesenberry style interdependent utility functions when a Utilitariansocial welfare function is employed and evaluates the appropriateness of the Gini coefficient and the coefficient of variation as possible measures of “depression” or “relative deprivation.” The paper reports a variety of measures of inequality for the 82 countries for which comparable data are available from the 1996 World Development Report. In 18% of the pair-wise comparisons of inequality in different countries the situation is ambiguous in the sense that neither country Lorenz dominates the other. Shorrocks[1982] Generalized Lorenz curves leave ambiguous 16% of paired welfare comparisons. By a wide variety of alternative measures, inequality among nations is much greater than inequality within countries. The data generated a surprising empirical result: for any utility function satisfying Dalton’s Principle of Transfers, the loss of welfare arising from within country inequality is approximately 40% of the loss caused by inequality among nations.
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Publisher Info
Paper provided by Wesleyan University, Department of Economics in its series Wesleyan Economics Working Papers with number
1998-001.
Length: 25 pages Date of creation: Jul 1998 Date of revision: Publication status: Published in Journal of Income Distribution,(1), 1998 Handle: RePEc:wes:weswpa:1998-001
Find related papers by JEL classification: D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution P5 - Economic Systems - - Comparative Economic Systems
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