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A consistent multidimensional Pigou-Dalton transfer principle

  • Kristof Bismans
  • Luc Lauwers
  • Erwin Ooghe

The Pigou-Dalton principle demands that a regressive transfer decreases social welfare. In the unidimensional setting this principle is consistent, because regressivity in terms of attribute amounts and regressivity in terms of individual well-being coincide in the case of a single attribute. In the multidimensional setting, however, the relationship between the various attributes and well-being is complex. To formulate a multidimensional Pigou-Dalton transfer principle, a concept of wellbeing must therefore first be defined. We propose a version of the Pigou-Dalton principle that defines regressivity in terms of the individual well-being ranking that underlies the social ranking on which the principle is imposed. This well-being ranking (of attribute bundles) is induced from the social ranking over distributions in which all individuals have the same attribute bundle. It is shown that this new principle—the consistent Pigou-Dalton principle—imposes a quasi-linear structure on the well-being ranking. We discuss the implications of this result within the literature on multidimensional inequality measurement and within the literature on needs.

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Paper provided by KU Leuven, Faculty of Economics and Business, Department of Economics in its series Working Papers Department of Economics with number ces0620.

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Date of creation: Mar 2006
Handle: RePEc:ete:ceswps:ces0620
Contact details of provider: Web page: http://feb.kuleuven.be/Economics/

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  1. Ebert, Udo, 1997. "Social Welfare When Needs Differ: An Axiomatic Approach," Economica, London School of Economics and Political Science, vol. 64(254), pages 233-44, May.
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  4. Shorrocks, Anthony, 2004. "Inequality and Welfare Evaluation of Heterogeneous Income Distributions," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
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  6. Fleurbaey, M. & Hagnere, C. & Trannoy, A., 1998. "Welfare Comparisons with Bounded Equivalence Scales," Papers 9823, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
  7. Serge-Christophe Kolm, 1977. "Multidimensional Egalitarianisms," The Quarterly Journal of Economics, Oxford University Press, vol. 91(1), pages 1-13.
  8. Udo Ebert & Patrick Moyes, 2003. "Equivalence scales reconsidered," Post-Print hal-00156453, HAL.
  9. Shorrocks, Anthony F, 1983. "Ranking Income Distributions," Economica, London School of Economics and Political Science, vol. 50(197), pages 3-17, February.
  10. Charles Blackorby & David Donaldson & Maria Auersperg, 1981. "A New Procedure for the Measurement of Inequality within and among Population Subgroups," Canadian Journal of Economics, Canadian Economics Association, vol. 14(4), pages 665-685, November.
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