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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 2005

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File URL: http://hdl.handle.net/10.1007/s10888-005-4383-2
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Article provided by Springer & Society for the Study of Economic Inequality in its journal The Journal of Economic Inequality.

Volume (Year): 2 (2005)
Issue (Month): 2 (January)
Pages: 61-87

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Handle: RePEc:kap:jecinq:v:2:y:2005:i:2:p:61-87
DOI: 10.1007/s10888-005-4383-2
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  5. Udo Ebert & Patrick Moyes, 2002. "Welfare, inequality and the transformation of incomes the case of weighted income distributions," Journal of Economics, Springer, vol. 77(1), pages 9-50, December.
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  17. Satya R. Chakravarty & Patrick Moyes, 2003. "Individual welfare, social deprivation and income taxation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(4), pages 843-869, 06.
  18. Gaertner, Wulf & Namazie, Ceema, 2003. "Income inequality, risk, and the transfer principle: A questionnaire-experimental investigation," Mathematical Social Sciences, Elsevier, vol. 45(2), pages 229-245, April.
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