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Copula-based measurement of dependence between dimensions of well-being

  • Koen DECANCQ

Well-being consists of many dimensions such as income, health and education. A society exhibits greater dependence between its dimensions of well-being when the positions of the individuals in the different dimensions are more aligned or correlated. Differences in dependence may lead to very different societies, even when the dimension-wise distributions are identical. I propose to use a copula-based framework to order societies with respect to their dependence. A class of measures of dependence is derived to which the multidimensional rank correlation coefficient belongs. I illustrate the usefulness of the approach by showing that Russian dependence between three dimensions of well-being has increased significantly between 1995 and 2003. Unfortunately, the aspect of dependence is missed by all composite well-being measures based on dimension-specific summary statistics such as the popular Human Development Index (HDI).

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Paper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces09.24.

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Date of creation: Dec 2009
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Handle: RePEc:ete:ceswps:ces09.24
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  2. Schmid, Friedrich & Schmidt, Rafael, 2007. "Multivariate conditional versions of Spearman's rho and related measures of tail dependence," Journal of Multivariate Analysis, Elsevier, vol. 98(6), pages 1123-1140, July.
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  7. Colangelo, Antonio & Scarsini, Marco & Shaked, Moshe, 2006. "Some positive dependence stochastic orders," Journal of Multivariate Analysis, Elsevier, vol. 97(1), pages 46-78, January.
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  12. DECANCQ, Koen, 2010. "Copula-based orderings of multivariate dependence," CORE Discussion Papers 2010012, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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