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Comparing degrees of inequality aversion

Author

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  • Kristof Bosmans

Abstract

We propose a straightforward dominance procedure for comparing social welfare orderings (SWOs) with respect to the degree of inequality aversion they express. Three versions of the procedure are considered, each of which uses a different underlying criterion of inequality comparisons: (i) a concept based on the Lorenz quasi-ordering, which we argue to be the ideal version, (ii) a concept based on a minimalist criterion of inequality, and (iii) a concept based on the relative differentials quasi-ordering. It turns out that the traditional Arrow-Pratt approach is equivalent to the latter two concepts for important classes of SWOs, but that it is profoundly inconsistent with the Lorenz-based concept. With respect to the problem of combining extreme inequality aversion and monotonicity, concepts (ii) and (iii) identify as extremely inequality averse a class of SWOs that includes leximin as a special case, whereas the Lorenz-based concept (i) concludes that extreme inequality aversion and monotonicity are incompatible.

Suggested Citation

  • Kristof Bosmans, 2006. "Comparing degrees of inequality aversion," Public Economics Working Paper Series ineqav, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.
    • Handle: RePEc:wpe:papers:ineqav
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    2. Bart Capéau, 2013. "Size and distribution trade-offs for the leximin ordering," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 11(2), pages 237-248, June.
    3. Antoine Bommier & Francois Le Grand, "undated". "A Robust Approach to Risk Aversion," Working Papers ETH-RC-13-002, ETH Zurich, Chair of Systems Design.
    4. Antoine Bommier & Stéphane Zuber, 2012. "The Pareto Principle Of Optimal Inequality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(2), pages 593-608, May.
    5. Kaname Miyagishima & Kristof Bosmans & Erwin Ooghe, 2014. "A characterization of maximin: corrigendum," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 2(2), pages 219-220, October.
    6. Yoram Amiel & Frank Cowell & Wulf Gaertner, 2012. "Distributional orderings: an approach with seven flavors," Theory and Decision, Springer, vol. 73(3), pages 381-399, September.
    7. Kristof Bosmans, 2007. "Extreme inequality aversion without separability," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 32(3), pages 589-594, September.
    8. Alain Babatoundé & Bart Capéau & Romain Houssa, 2023. "Welfare effects of indirect tax policies in West Africa," Working Papers of Department of Economics, Leuven 746845, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    9. Bosmans, Kristof, 2014. "Distribution-sensitivity of rank-dependent poverty measures," Journal of Mathematical Economics, Elsevier, vol. 51(C), pages 69-76.

    More about this item

    Keywords

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    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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