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Well-being inequality and preference heterogeneity

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  • Koen Decancq
  • Marc Flerubaey
  • Erik Schokkaert

Abstract

Standard measures of multidimensional inequality (implicitly) assume common preferences for all individuals and, hence, are not sensitive to preference heterogeneity among the members of society. In this paper, we measure the inequality of the distribution of equivalent incomes, which is a preference-sensitive multidimensional well-being measure. To quantify the contribution of preference heterogeneity to well-being inequality, we use a decomposition method that calculates well-being inequality in different counterfactual distributions. We focus on four sources of well-being inequality: the correlation between outcomes and preferences, the preference heterogeneity, the correlation between the outcome dimensions, and the inequality within each of the outcome dimensions. We find that preference heterogeneity accounts for a considerable part of overall well-being inequality in Russia for the period of 1995 to 2005.

Suggested Citation

  • Koen Decancq & Marc Flerubaey & Erik Schokkaert, 2016. "Well-being inequality and preference heterogeneity," Working Papers of Department of Economics, Leuven 543793, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    • Handle: RePEc:ete:ceswps:543793
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    3. Koen Decancq & Marc Fleurbaey & Erik Schokkaert, 2015. "Happiness, Equivalent Incomes and Respect for Individual Preferences," Economica, London School of Economics and Political Science, vol. 82, pages 1082-1106, December.
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    Cited by:

    1. Domenico Moramarco & Bram De Rock, 2022. "Nonparametric analysis of heterogeneous multidimensional fairness," Working Papers 621, ECINEQ, Society for the Study of Economic Inequality.
    2. Philipp Poppitz, 2019. "Multidimensional Inequality and Divergence: The Eurozone Crisis in Retrospect," Working Papers V-420-19, University of Oldenburg, Department of Economics, revised Feb 2019.
    3. Iwasaki, Masaki, 2022. "Social Preferences and Well-Being: Theory and Evidence," MPRA Paper 112198, University Library of Munich, Germany.
    4. Masaki Iwasaki, 2023. "Social preferences and well-being: theory and evidence," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-13, December.
    5. Koen Decancq & Marc Fleurbaey & François Maniquet, 2019. "Multidimensional poverty measurement with individual preferences," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 17(1), pages 29-49, March.
    6. Harun Onder & Pierre Pestieau & Grégory Ponthière, 2019. "Equivalent income versus equivalent lifetime: does the metric matter?," PSE Working Papers halshs-02187803, HAL.
    7. Domenico Moramarco & François Maniquet, 2022. "On the measurement of well-being with reference consumption," Working Papers 629, ECINEQ, Society for the Study of Economic Inequality.
    8. Philipp Poppitz, 2017. "Can subjective data improve inequality measurement? A multidimensional index of economic inequality," Working Papers 446, ECINEQ, Society for the Study of Economic Inequality.
    9. Philipp Poppitz, 2019. "Can Subjective Data Improve the Measurement of Inequality? A Multidimensional Index of Economic Inequality," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 146(3), pages 511-531, December.
    10. Marko Ledić & Ivica Rubil, 2021. "Beyond Wage Gap, Towards Job Quality Gap: The Role of Inter-Group Differences in Wages, Non-Wage Job Dimensions, and Preferences," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 155(2), pages 523-561, June.
    11. Barbosa, Estela Capelas & Cookson, Richard, 2019. "Multiple inequity in health care: An example from Brazil," Social Science & Medicine, Elsevier, vol. 228(C), pages 1-8.
    12. H. Xavier Jara & Erik Schokkaert, 2017. "Putting measures of individual well-being to use for ex-ante policy evaluation," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 15(4), pages 421-440, December.
    13. François Maniquet & Domenico Moramarco, 2022. "On the Measurement of Well-Being with Reference Consumption," Working Papers ECARES 2022-41, ULB -- Universite Libre de Bruxelles.
    14. Marko Ledic & Ivica Rubil, 2020. "Does going beyond income make a difference? Income vs. equivalent income in the EU over 2007-2011," Public Sector Economics, Institute of Public Finance, vol. 44(4), pages 423-462.
    15. Marc Fleurbaey & Gregory Ponthiere, 2023. "Measuring well-being and lives worth living," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(4), pages 1247-1266, May.
    16. Lukas Leitner, 2024. "Imprecision in the Estimation of Willingness to Pay Using Subjective Well-Being Data," Journal of Happiness Studies, Springer, vol. 25(7), pages 1-40, October.

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