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Ranking income distributions: a rank-dependent and needs-based approach

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  • Ida Petrillo

    (Università degli Studi di Bari "Aldo Moro”)

Abstract

This paper provides a normative framework to assess social welfare within a rank-dependent and bidimensional setting where individuals are characterized by income and needs. In line with the growing interest in top incomes and inequalities concerning the upper part of the income distribution (see Atkinson and Piketty, 2007; 2010; Aaberge, Havnes and Mogstad, 2013), we propose a complete framework to rank bidimensional distributions, by focussing on inequalities among the poorest as well as the richest individuals, both in the monetary and non-monetary dimension. To this end, we develop third degree inverse stochastic dominance conditions for classes of social welfare functions satisfying: i) downside inequality aversion with respect to income and upside inequality aversion with respect to needs; ii) upside inequality aversion with respect to income and downside inequality aversion with respect to needs; iii) upside inequality aversion both with respect to income and needs. Our results emerge along with the existing one, formulated by Zoli (2000), supporting downside inequality aversion both with respect to income and needs.

Suggested Citation

  • Ida Petrillo, 2017. "Ranking income distributions: a rank-dependent and needs-based approach," SERIES 03-2017, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised Jul 2017.
    • Handle: RePEc:bai:series:series_wp_03-2017
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    References listed on IDEAS

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    More about this item

    Keywords

    sequential stochastic dominance; social welfare; inequality;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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