Comparing degrees of inequality aversion
AbstractWe propose a straightforward dominance procedure for comparing social welfare orderings (SWOs) with respect to the degree of inequality aversion they express. Three versions of the procedure are considered, each of which uses a different underlying criterion of inequality comparisons: (i) a concept based on the Lorenz quasi-ordering, which we argue to be the ideal version, (ii) a concept based on a minimalist criterion of inequality, and (iii) a concept based on the relative differentials quasi-ordering. It turns out that the traditional Arrow-Pratt approach is equivalent to the latter two concepts for important classes of SWOs, but that it is profoundly inconsistent with the Lorenz-based concept. With respect to the problem of combining extreme inequality aversion and monotonicity, concepts (ii) and (iii) identify as extremely inequality averse a class of SWOs that includes leximin as a special case, whereas the Lorenz-based concept (i) concludes that extreme inequality aversion and monotonicity are incompatible.
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Bibliographic InfoPaper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics in its series Public Economics Working Paper Series with number ineqav.
Length: 24 pages
Date of creation: 2006
Date of revision:
Publication status: Forthcoming in Social Choice and Welfare.
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Web page: http://www.econ.kuleuven.ac.be/ew/academic/econover/default.htm
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Other versions of this item:
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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