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Empirical Welfare Analysis: When Preferences Matter

  • Jean-François Carpantier

    ()

    (CREA, Université de Luxembourg)

  • Christelle Sapata

    ()

    (Facultés Universitaires de Saint Louis, Bruxelles)

Fleurbaey and Maniquet have proposed the criteria of conditional equality and of egalitarian equivalence to assess the equity among individuals in an ordinal setting. Empirical applications are rare and only partially consistent with their framework. We propose a new empirical approach that relies on individual preferences, is consistent with the ordinal criteria and enables to compare them with the cardinal criteria. We estimate a utility function that incorporates individual heterogeneous preferences, obtain ordinal measures of well-being and apply conditional equality and egalitarian equivalence. We then propose two cardinal measures of well-being, that are comparable with the ordinal model, to compute Roemer’s and Van de gaer’s criteria. Finally we compare the characteristics of the worst-off displayed by each criterion. We apply this model to a sample of US micro data and obtain that about 18% of the worst-off are not common to all criteria.

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Paper provided by Center for Research in Economic Analysis, University of Luxembourg in its series CREA Discussion Paper Series with number 13-11.

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Date of creation: 2013
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Handle: RePEc:luc:wpaper:13-11
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  1. Bossert, Walter, 1995. "Redistribution mechanisms based on individual characteristics," Mathematical Social Sciences, Elsevier, vol. 29(1), pages 1-17, February.
  2. Rolf Aaberge & Ugo Colombino & Steinar Strøm, 2004. "Do more equal slices shrink the cake? An empirical investigation of tax-transfer reform proposals in Italy," Journal of Population Economics, Springer;European Society for Population Economics, vol. 17(4), pages 767-785, December.
  3. FLEURBAEY, Marc & MANIQUET, François, . "Fair income tax," CORE Discussion Papers RP 1845, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. André DECOSTER & Peter HAAN, 2010. "Empirical welfare analysis in random utility models of labour supply," Working Papers Department of Economics ces10.30, KU Leuven, Faculty of Economics and Business, Department of Economics.
  5. X. Ramos & D. Van De Gaer, 2012. "Empirical Approaches to Inequality of Opportunity: Principles, Measures, and Evidence," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/792, Ghent University, Faculty of Economics and Business Administration.
  6. Dirk Van de Gaer & Michel Martinez & Erik Schokkaert, 1998. "Measuring Intergenerational Mobility and Equality of Opportunity," Public Economics Working Paper Series ces9810, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.
  7. Almås, Ingvild & Cappelen, Alexander W. & Lind, Jo Thori & Sørensen, Erik Ø. & Tungodden, Bertil, 2011. "Measuring unfair (in)equality," Journal of Public Economics, Elsevier, vol. 95(7), pages 488-499.
  8. FLEURBAEY, Marc & MANIQUET, François, . "Fair social orderings when agents have unequal production skills," CORE Discussion Papers RP 1805, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Marc Fleurbaey & Walter Bossert, 1996. "Redistribution and compensation (*)," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 13(3), pages 343-355.
  10. FLEURBAEY, Marc & MANIQUET, François, . "Compensation and responsibility," CORE Discussion Papers RP 2284, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Schokkaert, Erik & Van de gaer, Dirk & Vandenbroucke, Frank & Luttens, Roland Iwan, 2004. "Responsibility sensitive egalitarianism and optimal linear income taxation," Mathematical Social Sciences, Elsevier, vol. 48(2), pages 151-182, September.
  12. Aaberge, Rolf & Dagsvik, John K & Strom, Steinar, 1995. " Labor Supply Responses and Welfare Effects of Tax Reforms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 635-59, December.
  13. Bonin, Holger & Schneider, Hilmar, 2006. "Analytical prediction of transition probabilities in the conditional logit model," Economics Letters, Elsevier, vol. 90(1), pages 102-107, January.
  14. Bargain, Olivier & Decoster, André & Dolls, Mathias & Neumann, Dirk & Peichl, Andreas & Siegloch, Sebastian, 2011. "Welfare, labor supply and heterogeneous preferences: evidence for Europe and the US," EUROMOD Working Papers EM5/11, EUROMOD at the Institute for Social and Economic Research.
  15. Fleurbaey, Marc, 2008. "Fairness, Responsibility, and Welfare," OUP Catalogue, Oxford University Press, number 9780199215911, December.
  16. Fleurbaey Marc, 1995. "Three Solutions for the Compensation Problem," Journal of Economic Theory, Elsevier, vol. 65(2), pages 505-521, April.
  17. Cameron,A. Colin & Trivedi,Pravin K., 2005. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9780521848053, November.
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