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Welfare as Simple(x) Equity Equivalents

Listed author(s):
  • Loïc Berger

    (IESEG School of Management and Fondazione Eni Enrico Mattei (FEEM))

  • Johannes Emmerling

    (Fondazione Eni Enrico Mattei (FEEM) and Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC))

Inequity plays a fundamental role in the evaluation of social welfare in many dimensions. We revisit the concept of inequity, whether across states of world (uncertainty), across individuals (inequality) and across generations (intergenerational equity), using a common framework generalizing the discounted expected utilitarianism approach. We propose a general measure of welfare as equity equivalents and develop the corresponding inequity index. We then allow for different degrees of inequity aversion across the three dimensions to span a simplex of possible inequity preferences and relate it to the recent literature on this topic. We show that the ordering of aggregation across the different dimensions matters for welfare evaluations and that many welfare-theoretical approaches developed in the literature may be seen as special cases of this general framework.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2017.14.

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Date of creation: Mar 2017
Handle: RePEc:fem:femwpa:2017.14
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