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Poverty and Welfare Measurement on the Basis of Prospect Theory

  • J.ntti, Markus
  • Kanbur, Ravi
  • Nyyss.l., Milla
  • Pirttil., Jukka

This paper examines the measurement of social welfare, poverty and inequality taking into account features that have been found to be important welfare determinants in behavioural economics. Most notably, we incorporate reference-dependence, loss aversion

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Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number UNU-WIDER Research Paper WP2012/109.

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Length: 35
Date of creation: 2012
Date of revision:
Handle: RePEc:unu:wpaper:wp2012-109
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  1. Stefano Bartolini & Ennio Bilancini & Francesco Sarracino, 2011. "Predicting the Trend of Well-Being in Germany: How Much Do Comparisons, Adaptation and Sociability Matter?," SOEPpapers on Multidisciplinary Panel Data Research 414, DIW Berlin, The German Socio-Economic Panel (SOEP).
  2. Ligon, Ethan & Schechter, Laura, 2002. "Measuring Vulnerability," 2002 Annual meeting, July 28-31, Long Beach, CA 19899, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  3. Richard Layard & Guy Mayraz & Stephen Nickell, 2009. "Does relative income matter? Are the critics right?," LSE Research Online Documents on Economics 28594, London School of Economics and Political Science, LSE Library.
  4. Delavande, Adeline & Gine, Xavier & McKenzie, David, 2009. "Measuring Subjective Expectations in Developing Countries: A Critical Review and New Evidence," Policy Research Working Paper Series 4824, The World Bank.
  5. Senik, Claudia, 2004. "When information dominates comparison: Learning from Russian subjective panel data," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2099-2123, August.
  6. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
  7. Adam Booij & Bernard Praag & Gijs Kuilen, 2010. "A parametric analysis of prospect theory’s functionals for the general population," Theory and Decision, Springer, vol. 68(1), pages 115-148, February.
  8. Di Tella, Rafael & Haisken-De New, John & MacCulloch, Robert, 2010. "Happiness adaptation to income and to status in an individual panel," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 834-852, December.
  9. Botond Koszegi & Matthew Rabin, 2004. "A Model of Reference-Dependent Preferences," Method and Hist of Econ Thought 0407001, EconWPA.
  10. Shorrocks, Anthony, 1978. "Income inequality and income mobility," Journal of Economic Theory, Elsevier, vol. 19(2), pages 376-393, December.
  11. Kanbur, Ravi, 2001. "Economic Policy, Distribution and Poverty: The Nature of Disagreements," World Development, Elsevier, vol. 29(6), pages 1083-1094, June.
  12. Sen, Amartya K, 1976. "Poverty: An Ordinal Approach to Measurement," Econometrica, Econometric Society, vol. 44(2), pages 219-31, March.
  13. Cesar Calvo & Stefan Dercon, 2007. "Chronic Poverty and All That: The Measurement of Poverty over Time," Economics Series Working Papers WPS/2007-04, University of Oxford, Department of Economics.
  14. Bernard M.S. Van Praag, 2010. "Well-being Inequality and Reference Groups - An Agenda for New Research," CESifo Working Paper Series 2984, CESifo Group Munich.
  15. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  16. Bossert, Walter & D'Ambrosio, Conchita, 2013. "Measuring Economic Insecurity," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  17. Gorodnichenko, Yuriy & Peter, Klara Sabirianova & Stolyarov, Dmitriy, 2009. "Inequality and Volatility Moderation in Russia: Evidence from Micro-Level Panel Data on Consumption and Income," IZA Discussion Papers 4233, Institute for the Study of Labor (IZA).
  18. Markus Jäntti & Ravi Kanbur & Milla Nyyssölä & Jukka Pirttilä, 2013. "Poverty and Welfare Measurement on the Basis of Prospect Theory," CESifo Working Paper Series 4095, CESifo Group Munich.
  19. Ravallion, Martin & Lokshin, Michael, 2002. "Self-rated economic welfare in Russia," European Economic Review, Elsevier, vol. 46(8), pages 1453-1473, September.
  20. Engström, Per & Nordblom, Katarina & Ohlsson, Henry & Persson, Annika, 2011. "Loss evasion and tax aversion," Working Papers in Economics 518, University of Gothenburg, Department of Economics.
  21. Graham, Carol & Eggers, Andrew & Sukhtankar, Sandip, 2004. "Does happiness pay?: An exploration based on panel data from Russia," Journal of Economic Behavior & Organization, Elsevier, vol. 55(3), pages 319-342, November.
  22. Kaushik Basu & Patrick Nolen, 2006. "Vulnerability, Unemployment and Poverty: A Class of Distribution and Sensitive Measures, Its Axiomatic Properties and Applications," Economics Discussion Papers 623, University of Essex, Department of Economics.
  23. Channing Arndt & Andres Garcia & Finn Tarp & James Thurlow, 2012. "Poverty Reduction and Economic Structure: Comparative Path Analysis for Mozambique and Vietnam," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 58(4), pages 742-763, December.
  24. Ravallion, Martin & Lokshin, Michael, 2005. "Who cares about relative deprivation ?," Policy Research Working Paper Series 3782, The World Bank.
  25. Tversky, Amos & Kahneman, Daniel, 1992. " Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
  26. Luna Bellani & Conchita D’Ambrosio, 2011. "Deprivation, Social Exclusion and Subjective Well-Being," Social Indicators Research, Springer, vol. 104(1), pages 67-86, October.
  27. Gaiha, Raghav & Imai, Katsushi, 2008. "Measuring Vulnerability and Poverty: Estimates for Rural India," Working Paper Series RP2008/40, World Institute for Development Economic Research (UNU-WIDER).
  28. Fredrik Carlsson & Pham Khanh Nam & Martin Linde-Rahr & Peter Martinsson, 2007. "Are Vietnamese farmers concerned with their relative position in society?," Journal of Development Studies, Taylor & Francis Journals, vol. 43(7), pages 1177-1188.
  29. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198281931, March.
  30. Indranil Dutta & James Foster & Ajit Mishra, 2011. "On measuring vulnerability to poverty," Social Choice and Welfare, Springer, vol. 37(4), pages 743-761, October.
  31. Cesar Calvo & Stefan Dercon, 2005. "Measuring Individual Vulnerability," Economics Series Working Papers 229, University of Oxford, Department of Economics.
  32. Luc Christiaensen & Anthony Shorrocks, 2012. "Measuring poverty over time," Journal of Economic Inequality, Springer, vol. 10(2), pages 137-143, June.
  33. Jalan, Jyotsna & Ravallion, Martin, 1998. "Transient Poverty in Postreform Rural China," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 338-357, June.
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