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Inequality, income, and well-being

Listed author(s):
  • DECANCQ, Koen

    ()

    (University of Antwerp, Katholieke Universiteit Leuven and Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium)

  • FLEURBAEY, Marc

    ()

    (Princeton University)

  • SCHOKKAERT, Erik

    ()

    (Katholieke Universiteit Leuven; Université catholique de Louvain, CORE, Belgium)

Individual well-being depends not only on income but also on other dimensions of life, such as health, the quality of social relations and of the environment, employment, and job satisfaction. In this paper we survey the economic literature on how to construct such overall measures of well-being. We distinguish three approaches: the capability (and functionings) approach, the use of subjective life satisfaction measures and the calculation of equivalent incomes. We discuss the normative assumptions underlying these three approaches, focusing on two issues: the degree to which individual preferences are respected and where in each approach the boundaries of individual responsibility are drawn. We compare the measurement of inequality in well-being with the use of multidimensional inequality measures. We illustrate the general theoretical issues in three domains of application: measuring the effects of household size and composition in the literature on equivalence scales, valuing publicly provided goods and services, and making international comparisons of well-being involving international PPP comparisons.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2014018.

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Date of creation: 11 Jun 2014
Handle: RePEc:cor:louvco:2014018
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