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Robust Inequality Comparisons

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This paper is concerned with the problem of ranking Lorenz curves in situations where the Lorenz curves intersect and no unambiguous ranking can be attained without introducing weaker ranking criteria than first-degree Lorenz dominance. To deal with such situations Aaberge (2009) introduced two alternative sequences of nested dominance criteria for Lorenz curves which was proved to characterize two separate systems of nested subfamilies of inequality measures. This paper uses the obtained characterization results to arrange the members of two different generalized Gini families of inequality measures into subfamilies according to their relationship to Lorenz dominance of various degrees. Since the various criteria of higher degree Lorenz dominance provide convenient computational methods, these results can be used to identify the largest subfamily of the generalized Gini families and thus the least restrictive social preferences required to reach unambiguous ranking of a set of Lorenz curves. From the weight-functions of these inequality measures we obtain intuitive interpretations of higher degree Lorenz dominance, which generally has been viewed as difficult to interpret because they involve assumptions about third and higher derivatives. To demonstrate the usefulness of these methods for empirical applications, we examine the time trend in income and earnings inequality of Norwegian males during the period 1967-2005.

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  • Rolf Aaberge & Magne Mogstad, 2010. "Robust Inequality Comparisons," Discussion Papers 623, Statistics Norway, Research Department.
  • Handle: RePEc:ssb:dispap:623
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    Cited by:

    1. Rolf Aaberge & Magne Mogstad, 2015. "Inequality in current and lifetime income," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 44(2), pages 217-230, February.
    2. Ingvild Almås & Tarjei Havnes & Magne Mogstad, 2011. "Baby booming inequality? Demographic change and earnings inequality in Norway, 1967–2000," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 9(4), pages 629-650, December.
    3. Daniela Špirková & Beata Stehlíková & Mária Zúbková, 2016. "Social-economic Dimension of Globalisation and Income Inequality," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 64(5), pages 1763-1773.
    4. Andreoli, Francesco & Havnes, Tarjei & Lefranc, Arnaud, 2014. "Equalization of Opportunity: Definitions, Implementable Conditions and Application to Early-Childhood Policy Evaluation," IZA Discussion Papers 8503, Institute of Labor Economics (IZA).
    5. Buhong Zheng, 2018. "Almost Lorenz dominance," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 51(1), pages 51-63, June.
    6. Aaberge, Rolf & Atkinson, Anthony B. & Modalsli, Jørgen, 2020. "Estimating long-run income inequality from mixed tabular data: Empirical evidence from Norway, 1875–2017," Journal of Public Economics, Elsevier, vol. 187(C).
    7. Mario COCCIA, 2018. "Violent crime driven by income Inequality between countries," Turkish Economic Review, KSP Journals, vol. 5(1), pages 33-55, March.
    8. Sehjpal, Ritika & Ramji, Aditya & Soni, Anmol & Kumar, Atul, 2014. "Going beyond incomes: Dimensions of cooking energy transitions in rural India," Energy, Elsevier, vol. 68(C), pages 470-477.

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    More about this item

    Keywords

    The Lorenz curve; Lorenz dominance; rank-dependent measures of inequality; the Gini coefficient; generalized Gini families of inequality measures.;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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