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Approximating unanimity orderings: An application to Lorenz dominance

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  • Anthony Shorrocks
  • Daniel Slottje

Abstract

Stochastic dominance and Lorenz dominance are examples of orderings which require unanimous agreement among an infinite set of indices. This paper considers various subsets of inequality measures that respect Lorenz dominance, and assesses the extent to which a small number of indices can reproduce the Lorenz ordering. Using income data for 80 countries, our results suggest that Lorenz dominance can be predicted with 99% accuracy using just 3 or 4 inequality measures, as long as two of them focus on the extreme upper and lower tails of the distribution. In contrast, confining attention to the index families and parameter ranges normally considered may fail to detect the majority of occasions when Lorenz curves intersect. These results lead us to question the faith placed in procedures based on a finite set of inequality indices, and to suggest that similar lessons will apply to other types of unanimity orderings. Copyright Springer-Verlag 2002
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Suggested Citation

  • Anthony Shorrocks & Daniel Slottje, 2002. "Approximating unanimity orderings: An application to Lorenz dominance," Journal of Economics, Springer, vol. 9(1), pages 91-117, December.
  • Handle: RePEc:kap:jeczfn:v:9:y:2002:i:1:p:91-117
    DOI: 10.1007/BF03052501
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    Cited by:

    1. repec:eee:ecolet:v:159:y:2017:i:c:p:100-103 is not listed on IDEAS
    2. Guanghua Wan & Ming Lu & Zhao Chen, 2007. "Globalization And Regional Income Inequality: Empirical Evidence From Within China," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 53(1), pages 35-59, March.
    3. Wan, Guanghua & Lu, Ming & Chen, Zhao, 2004. "Globalization and Regional Income Inequality: Evidence from within China," WIDER Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
    4. Wan, Guanghua, 2002. "Regression-based Inequality Decomposition: Pitfalls and a Solution Procedure," WIDER Working Paper Series 101, World Institute for Development Economic Research (UNU-WIDER).
    5. Greselin Francesca, 2014. "More Equal and Poorer, or Richer but More Unequal?," Stochastics and Quality Control, De Gruyter, vol. 29(2), pages 99-117, December.
    6. Suman Seth & Gaston Yalonetzky, 2016. "Has the world converged? A robust analysis of non-monetary bounded indicators," Working Papers 398, ECINEQ, Society for the Study of Economic Inequality.

    More about this item

    Keywords

    Inequality; Lorenz Dominance; D63;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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