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The Distributional Change In Second-Degree Stochastic Dominance And Its Decomposition

Author

Listed:
  • Iltae Kim

    (Chonnam National University)

  • Suyeol Ryu

    (Busan Development Institute)

Abstract

This paper introduces a new concept, a left-side strong second-degree stochastic dominance (L-SSSD) shift which includes a left-side strong increase in risk (L-SIR) shift and proves that an L-SSSD can be decomposed into an L-SIR and one subset of first-degree stochastic dominance (FSD) which is a subset of a monotone probability ratio (MPR). We show that one can obtain an intuitively appealing comparative statics result for L-SSSD shifts by using the risk preferences of risk-averse individuals with prudence.

Suggested Citation

  • Iltae Kim & Suyeol Ryu, 2004. "The Distributional Change In Second-Degree Stochastic Dominance And Its Decomposition," Korean Economic Review, Korean Economic Association, vol. 20, pages 263-274.
    • Handle: RePEc:kea:keappr:ker-20041231-20-2-03
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    More about this item

    Keywords

    progressive income taxation; Labor supply response; piece-wise Linear budget constraint; 4 estimation; robustness of results; the Laffer curve;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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