A note on the 'Natural Rate of Subjective Inequality' hypothesis and the approximate relationship between the Gini coefficient and the Atkinson index
In a recent paper in this journal, Lambert et al (2003) sought to establish the Natural Rate of Subjective Inequality (NRSI) hypothesis. In this note, their test of the NRSI hypothesis is critically evaluated and an alternative reason is offered as to why their empirics appeared to support it. The findings, based on simulation, do not overturn the NRSI hypothesis, but indicate the need for deeper and more thorough analysis if this insightful and potentially far-reaching hypothesis is to be established.
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- McDonald, James B, 1984. "Some Generalized Functions for the Size Distribution of Income," Econometrica, Econometric Society, vol. 52(3), pages 647-63, May.
- Valentino Dardanoni & Peter Lambert, 2001.
"Horizontal inequity comparisons,"
Social Choice and Welfare,
Springer, vol. 18(4), pages 799-816.
- Wilfling, Bernd & Kramer, Walter, 1993. "The Lorenz-ordering of Singh-Maddala income distributions," Economics Letters, Elsevier, vol. 43(1), pages 53-57.
- Lambert, Peter J. & Millimet, Daniel L. & Slottje, Daniel, 2003. "Inequality aversion and the natural rate of subjective inequality," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1061-1090, May.
- Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
- Singh, S K & Maddala, G S, 1976. "A Function for Size Distribution of Incomes," Econometrica, Econometric Society, vol. 44(5), pages 963-70, September.
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