IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Income Mobility, Inequality and Social Welfare

  • Creedy, John
  • Wilhelm, Mark

It is often argued that an observation of rising annual income inequality need not have negative normative implications. The argument is that if there has been a sufficiently large simultaneous increase in mobility, the inequality of income measured over a longer time period can be lower despite the rise in annual inequality. In this paper, it is shown by example that if normative implications are drawn from a standard social welfare function, the set of circumstances put forward in the above argument are not sufficient to guarantee that social welfare will improve. The reason is that even though rising mobility does reduce longer term inequality, it also increases the variability of income profiles over time and the latter has a detrimental social welfare effect. Hence, there are two types of mobility: one which reduces inequality (regression to the mean), but another that increases inequality (relative movements uncorrelated with incomes). Further, if individuals' aversion to income variability is sufficiently larger than the social welfare judge's aversion to inequality, then an increase in mobility, no matter how large, cannot offset the negative normative effect of rising annual inequality. Copyright 2002 by Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.blackwell-synergy.com/servlet/useragent?func=synergy&synergyAction=showTOC&journalCode=aepa&volume=41&issue=2&year=2002&part=null
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Wiley Blackwell in its journal Australian Economic Papers.

Volume (Year): 41 (2002)
Issue (Month): 2 (June)
Pages: 140-50

as
in new window

Handle: RePEc:bla:ausecp:v:41:y:2002:i:2:p:140-50
Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0004-900X

Order Information: Web: http://www.blackwellpublishing.com/subs.asp?ref=0004-900X

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bla:ausecp:v:41:y:2002:i:2:p:140-50. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)

or (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.