IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Decomposing Inequality and Social Welfare Changes: The Use of Alternative Welfare Metrics

  • Creedy, John
  • Hérault, Nicolas

This paper presents two ‘non-welfarist’ approaches and one ‘welfarist’ approach to decompose changes in inequality and social welfare into three components: population, tax policy and labour supply effects. As an illustration, changes in inequality and in values of a social welfare function in Australia between 2001 and 2006 are examined. Inequality is first defined in non-welfarist terms as a function of disposable income: the independent judge places no value on leisure. Then this is modified to allow for evaluations using a weighted geometric mean of disposable income and leisure. This is seen to modify the evaluation of changes in important ways. Furthermore, the results are shown to be quite different from those obtained using a ‘welfarist’ evaluation in terms of money metric utility, where separate behavioural effects cannot be isolated.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://researcharchive.vuw.ac.nz/handle/10063/2432
Download Restriction: no

Paper provided by Victoria University of Wellington, Chair in Public Finance in its series Working Paper Series with number 2432.

as
in new window

Length:
Date of creation: 2012
Date of revision:
Handle: RePEc:vuw:vuwcpf:2432
Contact details of provider: Postal: School of Accounting & Commercial Law, Victoria University of Wellington, PO Box 600, Wellington, New Zealand
Phone: +64 (4) 463 5775
Fax: +64 (4) 463 5076
Web page: http://www.victoria.ac.nz/sacl/about/chair-in-public-finance
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Donaldson, David, 1992. "On The Aggregation Of Money Measures Of Well-Being In Applied Welfare Economics," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(01), July.
  2. Mercedes Sastre & Alain Trannoy, 2002. "Shapley inequality decomposition by factor components: Some methodological issues," Journal of Economics, Springer, vol. 9(1), pages 51-89, December.
  3. Frank Cowell & Carlo V. Fiorio, 2009. "Inequality decomposition: a reconciliation," LSE Research Online Documents on Economics 25431, London School of Economics and Political Science, LSE Library.
  4. Blundell, Richard & Shephard, Andrew, 2011. "Employment, Hours of Work and the Optimal Taxation of Low Income Families," IZA Discussion Papers 5745, Institute for the Study of Labor (IZA).
  5. Rolf Aaberge & Ugo Colombino, 2008. "Designing Optimal Taxes with a Microeconometric Model of Household Labour Supply," CHILD Working Papers wp06_08, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  6. Arthur Charpentier & Stephane Mussard, 2010. "Income Inequality Games," Cahiers de recherche 10-03, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
  7. Louis Kaplow & Steven Shavell, 2001. "Any Non-welfarist Method of Policy Assessment Violates the Pareto Principle," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 281-286, April.
  8. Robin Boadway & Maurice Marchand & Pierre Pestieau & María del Mar Racionero, 2002. "Optimal Redistribution with Heterogeneous Preferences for Leisure," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(4), pages 475-498, October.
  9. Stéphane Mussard, 2005. "Une réconciliation entre la décomposition en sous-groupes et la décomposition en sources de revenu de l’indice de Gini La multi-décomposition de l’indicateur de Gini," Cahiers de recherche 05-06, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
  10. Olivier Bargain, 2010. "Back to the Future - Decomposition Analysis of Distributive Policies using Behavioural Simulations," Working Papers 201032, School of Economics, University College Dublin.
  11. John Creedy & Cath Sleeman, 2005. "Adult equivalence scales, inequality and poverty," New Zealand Economic Papers, Taylor & Francis Journals, vol. 39(1), pages 51-81.
  12. Jenkins, Stephen P & Cowell, Frank A, 1994. "Parametric Equivalence Scales and Scale Relativities," Economic Journal, Royal Economic Society, vol. 104(425), pages 891-900, July.
  13. André Decoster & Peter Haan, 2010. "Empirical Welfare Analysis in Random Utility Models of Labour Supply," SOEPpapers on Multidisciplinary Panel Data Research 340, DIW Berlin, The German Socio-Economic Panel (SOEP).
  14. Ericson, Peter & Flood, Lennart, 2009. "A Microsimulation Approach to an Optimal Swedish Income Tax," IZA Discussion Papers 4379, Institute for the Study of Labor (IZA).
  15. John Creedy & Guyonne Kalb & Rosanna Scutella, 2006. "Income distribution in discrete hours behavioural microsimulation models: An illustration," Journal of Economic Inequality, Springer, vol. 4(1), pages 57-76, April.
  16. Giuseppe Pignataro, 2010. "Measuring equality of opportunity by Shapley value," Economics Bulletin, AccessEcon, vol. 30(1), pages 786-798.
  17. John Creedy & Nicolas Hérault & Guyonne Kalb, 2011. "Measuring welfare changes in behavioural microsimulation modelling: Accounting for the random utility component," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 5-34, May.
  18. FLEURBAEY, Marc & MANIQUET, François, 1998. "Optimal income taxation: and ordinal approach," CORE Discussion Papers 1998065, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  19. Bargain, Olivier, 2009. "The distributional effects of tax-benefit policies under New Labour: a Shapley decomposition," EUROMOD Working Papers EM2/09, EUROMOD at the Institute for Social and Economic Research.
  20. Blackorby, Charles & Laisney, Francois & Schmachtenberg, Rolf, 1993. "Reference-price-independent welfare prescriptions," Journal of Public Economics, Elsevier, vol. 50(1), pages 63-76, January.
  21. Banks, James & Johnson, Paul, 1994. "Equivalence Scale Relativities Revisited," Economic Journal, Royal Economic Society, vol. 104(425), pages 883-90, July.
  22. John Creedy & Guyonne Kalb, 2005. "Measuring Welfare Changes In Labour Supply Models," Manchester School, University of Manchester, vol. 73(6), pages 664-685, December.
  23. Frédéric CHANTREUIL & Alain TRANNOY, 2011. "Inequality Decomposition Values," Annales d'Economie et de Statistique, ENSAE, issue 101-102, pages 13-36.
  24. Stanislav Kolenikov & Anthony Shorrocks, 2005. "A Decomposition Analysis of Regional Poverty in Russia," Review of Development Economics, Wiley Blackwell, vol. 9(1), pages 25-46, 02.
  25. Suman Seth, 2013. "A class of distribution and association sensitive multidimensional welfare indices," Journal of Economic Inequality, Springer, vol. 11(2), pages 133-162, June.
  26. Ramani Gunatilaka & Duangkamon Chotikapanich, 2006. "Inequality Trends and Determinants in Sri Lanka 1980-2002: A Shapley Approach to Decomposition," Monash Econometrics and Business Statistics Working Papers 6/06, Monash University, Department of Econometrics and Business Statistics.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:vuw:vuwcpf:2432. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Library Technology Services)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.