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A New Framework of Measuring Inequality: Variable Equivalence Scales and Group-Specific Well-Being Limits ; Sensitivity Findings for German Personal Income Distribution 1995-2009

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  • Jürgen Faik

Abstract

The discussion paper examines sensitivity influences on the German personal income distribution in a time-series perspective and in a methodically broad manner. The author spins on the following "adjusting screws" of distributional analyses: (1) different kinds of equivalence scales, (2) different demarcations of income areas (in the sense of social classes), (3) different inequality indicators, and (4) different income operationalisations. Furthermore, the new approach related to measuring incomeinequality, which is presented in the paper and which incorporates variable equivalence scales, is applied to socio-demographic stratification in Germany to exemplarily demonstrate the power of this new approach. All in all, the analyses of the paper point to the necessity of a rigorous methodological foundation of distributional studies, especially concerning the selection of a set of (preferably variable) equivalence scales, the choice of the inequality indicator, and - not least - of the income variable. Thispaper refers to data from the German Socio-Economic Panel (1995-2009) in contrast to FaMa discussion paper 6/2010 which partly was similar to this paper but methodologically less elaborated; the last-mentioned paper was related to the German Income and Consumption Surveys ("Einkommens- und Verbrauchsstichproben") 1993-2003.

Suggested Citation

  • Jürgen Faik, 2011. "A New Framework of Measuring Inequality: Variable Equivalence Scales and Group-Specific Well-Being Limits ; Sensitivity Findings for German Personal Income Distribution 1995-2009," SOEPpapers on Multidisciplinary Panel Data Research 401, DIW Berlin, The German Socio-Economic Panel (SOEP).
  • Handle: RePEc:diw:diwsop:diw_sp401
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    References listed on IDEAS

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    1. Amiel,Yoram & Cowell,Frank, 1999. "Thinking about Inequality," Cambridge Books, Cambridge University Press, number 9780521466967, April.
    2. Udo Ebert & Patrick Moyes, 2003. "Equivalence Scales Reconsidered," Econometrica, Econometric Society, vol. 71(1), pages 319-343, January.
    3. Clark, Andrew E. & Oswald, Andrew J., 1996. "Satisfaction and comparison income," Journal of Public Economics, Elsevier, vol. 61(3), pages 359-381, September.
    4. Bradbury, Bruce, 1994. "Measuring the Cost of Children," Australian Economic Papers, Wiley Blackwell, vol. 33(62), pages 120-138, June.
    5. Jürgen Faik, 2011. "Der Zerlegungs-Ansatz – ein alternativer Vorschlag zur Messung von Armut," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer;Deutsche Statistische Gesellschaft - German Statistical Society, vol. 4(4), pages 293-315, January.
    6. Aaberge, Rolf & Melby, Ingrid, 1998. "The Sensitivity of Income Inequality to Choice of Equivalence Scales," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(4), pages 565-569, December.
    7. Cowell, Frank A., 1980. "Generalized entropy and the measurement of distributional change," European Economic Review, Elsevier, vol. 13(1), pages 147-159, January.
    8. Donaldson, David & Pendakur, Krishna, 2004. "Equivalent-expenditure functions and expenditure-dependent equivalence scales," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 175-208, January.
    9. Coulter, Fiona A E & Cowell, Frank A & Jenkins, Stephen P, 1992. "Equivalence Scale Relativities and the Extent of Inequality and Poverty," Economic Journal, Royal Economic Society, vol. 102(414), pages 1067-1082, September.
    10. Olga Cantó & Coral del Río & Carlos Gradín, "undated". "Poverty Statics And Dynamics: Does The Accounting Period Matter?," Working Papers 22-02 Classification-JEL , Instituto de Estudios Fiscales.
    11. Jürgen Faik, 2011. "A Behaviouristic Approach for Measuring Poverty: The Decomposition Approach ; Empirical Illustrations for Germany 1995-2009," SOEPpapers on Multidisciplinary Panel Data Research 383, DIW Berlin, The German Socio-Economic Panel (SOEP).
    12. Buhmann, Brigitte, et al, 1988. "Equivalence Scales, Well-Being, Inequality, and Poverty: Sensitivity Estimates across Ten Countries Using the Luxembourg Income Study (LIS) Database," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 34(2), pages 115-142, June.
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    More about this item

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D60 - Microeconomics - - Welfare Economics - - - General

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