A Generalised Social Welfare Function and its Disaggregation by Components of Income: The Method and Application
The Social Welfare Function (SWF) is a decision rule to rank alternative social states in a complete fashion in terms of social welfare. This paper questions the philosophy of Paretian Principle as a desirable property of the SWF. It shows that it is possible to generalize the widely used Sen SWF, which can be non-Paretian under special circumstances. Also, it demonstrates the disaggregation method of this SWF by components of income using the Gini decomposition process. The method is applied to Australian Household Expenditure Survey data to estimate the trend of welfare of total income and its components in Australia from 1984 to 1993-94.
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- 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.
- Amartya Sen, 1976. "Real National Income," Review of Economic Studies, Oxford University Press, vol. 43(1), pages 19-39.
- Yitzhaki, Shlomo, 1982. "Relative deprivation and economic welfare," European Economic Review, Elsevier, vol. 17(1), pages 99-113.
- Shlomo Yitzhaki, 1979. "Relative Deprivation and the Gini Coefficient," The Quarterly Journal of Economics, Oxford University Press, vol. 93(2), pages 321-324.
- Sheshinski, Eytan, 1972. "Relation between a social welfare function and the gini index of income inequality," Journal of Economic Theory, Elsevier, vol. 4(1), pages 98-100, February.
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