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Lorenz non-consistent welfare and inequality measurement

  • Alain Chateauneuf

    ()

  • Patrick Moyes

    ()

Typical welfare and inequality measures are required to be Lorenz consistent which guarantees that inequality decreases and welfare increases as a result of a progressive transfer. We explore the implications for welfare and inequality measurement of substituting the weaker absolute differentials and deprivation quasi-orderings for the Lorenz quasi-ordering. Restricting attention to distributions of equal means, we show that the utilitarian model – the so-called expected utility model in the theory of risk – does not permit one to make a distinction between the views embedded in the differentials, deprivation and Lorenz quasi-orderings. In contrast it is possible within the dual model of M. Yaari (Econometrica 55 (1987), 99–115) to derive the restrictions to be placed on the weighting function which guarantee that the corresponding welfare orderings are consistent with the differentials and deprivation quasi-orderings respectively. Finally we drop the equal mean condition and indicate the implications of our approach for the absolute ethical inequality indices. Copyright Kluwer Academic Publishers 2004

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File URL: http://hdl.handle.net/10.1007/s10888-004-4383-7
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Article provided by Springer in its journal The Journal of Economic Inequality.

Volume (Year): 2 (2004)
Issue (Month): 2 (August)
Pages: 61-87

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Handle: RePEc:kap:jecinq:v:2:y:2004:i:2:p:61-87
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  18. Amiel, Yoram & Cowell, Frank A., 1992. "Measurement of income inequality : Experimental test by questionnaire," Journal of Public Economics, Elsevier, vol. 47(1), pages 3-26, February.
  19. Chew, Soo Hong, 1983. "A Generalization of the Quasilinear Mean with Applications to the Measurement of Income Inequality and Decision Theory Resolving the Allais Paradox," Econometrica, Econometric Society, vol. 51(4), pages 1065-92, July.
  20. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
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  24. Alain Chateauneuf & Michèle Cohen & Isaac Meilijson, 2004. "Four notions of mean preserving increase in risk, risk attitudes and applications to the Rank-Dependent Expected Utility model," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00212281, HAL.
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