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Inequality measurement with subgroup decomposability and level-sensitivity

  • Subramanian, Subbu
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    Subgroup Decomposability is a very useful property in an inequality measure, and level-sensitivity, which requires a given level of inequality to acquire a greater significance the poorer a population is, is a distributionally appealing axiom for an inequality index to satisfy. In this paper, which is largely in the nature of a recollection of important results on the characterization of subgroup decomposable inequality measures, the mutual compatibility of subgroup decomposability and level-sensitivity is examined, with specific reference to a classification of inequality measures into relative, absolute, centrist, and unit-consistent types. Arguably, the most appealing combination of properties for a symmetric, continuous, normalized, transfer-preferring and replication-invariant (S-C-N-T-R) inequality measure to satisfy is that of subgroup decomposability, centrism, unit-consistency and level-sensitivity. The existence of such an inequality index is (as far as this author is aware) yet to be established. However, it can be shown, as is done in this paper, that there does exist an S-C-N-T-R measure satisfying the (plausibly) next-best combination of properties - those of decomposability, centrism, unit-consistency and level-neutrality.

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    Article provided by Kiel Institute for the World Economy in its journal Economics: The Open-Access, Open-Assessment E-Journal.

    Volume (Year): 5 (2011)
    Issue (Month): ()
    Pages: 1-18

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    Handle: RePEc:zbw:ifweej:20119
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    1. Satya Chakravarty & Swami Tyagarupananda, 2009. "The subgroup decomposable intermediate indices of inequality," Spanish Economic Review, Springer, vol. 11(2), pages 83-97, June.
    2. √Čtienne Gilbert, 1983. "Sudhir Anand, Inequality and Poverty in Malaysia, measurement and decomposition," Revue Tiers Monde, Programme National Pers√©e, vol. 24(95), pages 709-710.
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