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Social Welfare Orderings: A Life-Cycle Perspective

  • Ramses H. ABUL NAGA

Consider the problem of measuring long-run household welfare and investigating welfare orderings from cross-section data. Life-cycle theories emphasize that consumption is allocated intertemporally on the basis of a long-term concept of resources, which differs from household income. Expenditure is also subject to transitoriness because diaries on spending are kept for a period of two to four weeks. Via joint modelling of household income and expenditure, we provide bounds for the deficit curve of lifecycle incomes using two distinct predictors of this unobservable. A third predictor generates a deficit curve also lying within these bounds.

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Paper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 01.12.

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Length: 21 pages + fig.
Date of creation: Dec 2001
Date of revision:
Publication status: Published in Economica, vol. 72, August 2005, pp. 497-514
Handle: RePEc:lau:crdeep:01.12
Contact details of provider: Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Phone: ++41 21 692.33.64
Web page: http://www.hec.unil.ch/deep/publications/cahiers/series
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  1. Anderson, Gordon, 1996. "Nonparametric Tests of Stochastic Dominance in Income Distributions," Econometrica, Econometric Society, vol. 64(5), pages 1183-93, September.
  2. Martin Browning & Thomas F. Crossley, 2000. "The Life Cycle Model of Consumption and Saving," Social and Economic Dimensions of an Aging Population Research Papers 28, McMaster University.
  3. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
  4. Musgrove, Philip, 1979. "Permanent Household Income and Consumption in Urban South America," American Economic Review, American Economic Association, vol. 69(3), pages 355-68, June.
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  6. Ramses ABUL NAGA & Robin BURGESS, 1997. "Prediction and Determination of Household Permanent Income," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9705, Université de Lausanne, Faculté des HEC, DEEP.
  7. Foster, James E & Shorrocks, Anthony F, 1988. "Poverty Orderings," Econometrica, Econometric Society, vol. 56(1), pages 173-77, January.
  8. Attfield, C L F, 1976. "Estimation of the Structural Parameters in a Permanent Income Model," Economica, London School of Economics and Political Science, vol. 43(171), pages 247-54, August.
  9. Ramses H. ABUL NAGA & Enrico BOLZANI, 2000. "Poverty and Permanent Income : A Methodology for Cross-Section Data," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 00.26, Université de Lausanne, Faculté des HEC, DEEP.
  10. Shorrocks, Anthony F, 1983. "Ranking Income Distributions," Economica, London School of Economics and Political Science, vol. 50(197), pages 3-17, February.
  11. Davies, James & Hoy, Michael, 1995. "Making Inequality Comparisons When Lorenz Curves Intersect," American Economic Review, American Economic Association, vol. 85(4), pages 980-86, September.
  12. Daniel T. Slesnick, 1998. "Empirical Approaches to the Measurement of Welfare," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 2108-2165, December.
  13. Robert E. Hall & Frederic S. Mishkin, 1980. "The Sensitivity of Consumption to Transitory Income: Estimates from Panel Data on Households," NBER Working Papers 0505, National Bureau of Economic Research, Inc.
  14. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, vol. 55(4), pages 749-64, July.
  15. Jacques Silber, 1998. "On Inequality in Consumption Expenditures. The Case of Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 134(IV), pages 545-564, December.
  16. Milton Friedman & Simon Kuznets, 1954. "Income from Independent Professional Practice," NBER Books, National Bureau of Economic Research, Inc, number frie54-1, October.
  17. Robert E. Hall, 1987. "Consumption," NBER Working Papers 2265, National Bureau of Economic Research, Inc.
  18. Cowell, F.A., 2000. "Measurement of inequality," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 2, pages 87-166 Elsevier.
  19. Dagum, Camilo, 1990. "On the relationship between income inequality measures and social welfare functions," Journal of Econometrics, Elsevier, vol. 43(1-2), pages 91-102.
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