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What do normative indices of multidimensional inequality really measure?

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  • Bosmans, Kristof
  • Decancq, Koen
  • Ooghe, Erwin

Abstract

We argue that normative indices of multidimensional inequality do not only measure a distribution's extent of inequity (i.e., the gaps between the better-off and the worse-off), but also its extent of inefficiency (i.e., the non-realized mutually beneficial exchanges of goods). We provide a decomposition that allows us to quantify these two parts of inequality. Strikingly, the inequity component turns out to be a two-stage measure, that is, a measure that applies a unidimensional inequality measure to the vector of individual well-being levels. The decomposition also clarifies existing controversies surrounding two prominent transfer axioms, viz., uniform majorization and correlation increasing majorization. An application to inequality in human development illustrates the analysis.

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  • Bosmans, Kristof & Decancq, Koen & Ooghe, Erwin, 2015. "What do normative indices of multidimensional inequality really measure?," Journal of Public Economics, Elsevier, vol. 130(C), pages 94-104.
    • Handle: RePEc:eee:pubeco:v:130:y:2015:i:c:p:94-104
    DOI: 10.1016/j.jpubeco.2015.03.003
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    5. Loïc Berger & Johannes Emmerling, 2020. "Welfare As Equity Equivalents," Journal of Economic Surveys, Wiley Blackwell, vol. 34(4), pages 727-752, September.
    6. Paolo Giovanni Piacquadio, 2017. "A Fairness Justification of Utilitarianism," Econometrica, Econometric Society, vol. 85, pages 1261-1276, July.
    7. Florent Bresson & Jean-Yves Duclos & Flaviana Palmisano, 2019. "Intertemporal pro-poorness," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 52(1), pages 65-96, January.
    8. Bosmans, Kristof & Decancq, Koen & Ooghe, Erwin, 2018. "Who's afraid of aggregating money metrics?," Theoretical Economics, Econometric Society, vol. 13(2), May.
    9. Koen Decancq, 2017. "Measuring Multidimensional Inequality in the OECD Member Countries with a Distribution-Sensitive Better Life Index," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 131(3), pages 1057-1086, April.
    10. Koen Decancq & Marc Fleurbaey & Erik Schokkaert, 2017. "Wellbeing Inequality and Preference Heterogeneity," Economica, London School of Economics and Political Science, vol. 84(334), pages 210-238, April.
    11. Kristof Bosmans & Z. Emel Öztürk, 2018. "An axiomatic approach to the measurement of envy," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 50(2), pages 247-264, February.
    12. Lidia Ceriani & Chiara Gigliarano, 2020. "Multidimensional Well-Being: A Bayesian Networks Approach," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 152(1), pages 237-263, November.
    13. DUJARDIN, Claire & lorant, VINCENT & THOMAS, Isabelle, 2013. "Self-assessed health of elderly people in Brussels: does the built environment matter?," LIDAM Discussion Papers CORE 2013048, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    14. Rolf Aaberge & Ugo Colombino, 2018. "Structural Labour Supply Models and Microsimulation," International Journal of Microsimulation, International Microsimulation Association, vol. 11(1), pages 162-197.
    15. Shatakshee Dhongde & Yi Li & Prasanta K. Pattanaik & Yongsheng Xu, 2016. "Binary data, hierarchy of attributes, and multidimensional deprivation," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(4), pages 363-378, December.
    16. Rolf Aaberge & Andrea Brandolini, 2014. "Multidimensional poverty and inequality," Discussion Papers 792, Statistics Norway, Research Department.
    17. Xu, Aiting & Qiu, Keyang & Zhu, Yuhan, 2023. "The measurements and decomposition of innovation inequality: Based on Industry − University − Research perspective," Journal of Business Research, Elsevier, vol. 157(C).
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    19. Suman Seth and Maria Emma Santos, 2018. "Multidimensional Inequality and Human Development," OPHI Working Papers ophiwp114_2.pdf, Queen Elizabeth House, University of Oxford.

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    More about this item

    Keywords

    Multidimensional inequality; Equity; Efficiency; Uniform majorization; Correlation increasing majorization;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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