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On the consistent measurement of attainment and shortfall inequality

  • Lambert, Peter
  • Zheng, Buhong
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    In measuring inequality of a bounded variable such as health status, one can focus on attainments or shortfalls. However, rankings of social states by attainment and shortfall inequality do not necessarily mirror one another. We propose a requirement, that attainment inequality and shortfall inequality be measured consistently, and we examine the performance of partial orderings and indices of inequality in this respect. For relative inequality and all currently documented intermediate inequality concepts, the orderings fail our consistency requirement, as do all indices which respect these orderings. However, the absolute inequality partial ordering satisfies consistency. We identify two classes of indices of absolute inequality, one containing rank-independent and the other rank-dependent indices, which measure attainment and shortfall inequality consistently (in fact identically). The only subgroup decomposable inequality index, of any type, which measures attainment and shortfall inequality consistently is the variance. We discuss implications for the study of pure health inequality.

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    Article provided by Elsevier in its journal Journal of Health Economics.

    Volume (Year): 30 (2011)
    Issue (Month): 1 (January)
    Pages: 214-219

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    Handle: RePEc:eee:jhecon:v:30:y:2011:i:1:p:214-219
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