robust international comparisons of distributions of disposable income and regional public goods the paper provides robust normative comparisons of 12 oecd countries based on their distributions of disposable income and access to two regional public goods infant mortality and pupil teacher ratios at public schools comparisons are performed using two and three dimensional dominance criteria that coincide with the unanimity of utilitarian judgments taken over specific classes of utility functions the criteria succeed in ranking conclusively about 30 of all possible comparisons in the two dimensional case compared with 67 for one dimensional income based comparisons and 6 for three dimensional ones introducing local public goods seems to worsen the relative standing of anglo saxon countries

a dominance approach to the appraisal of the distribution of well being across countries abstract this paper proposes a dominance approach to study inequality of well being across countries we consider a class of well being indices based on the three attributes used in the hdi human development index indices are required to satisfy preference for egalitarian marginal distributions of income health and education alep substitution of attributes and priority to poor countries in allocating funds to enhance health and education we exhibit sufficient conditions for checking dominance over the defined class of well being indices we apply our method to country data from 2000 to 2005 the deterioration in health conditions in poor countries is why welfare improvements at the world level cannot be ascertained

measuring lifetime poverty abstract this paper presents an axiomatic framework for measuring lifetime poverty over multiple periods for an individual we argue that lifetime poverty is influenced by both the snapshot poverty of each period and the poverty level of the permanent lifetime consumption it is also influenced by how poverty spells are distributed over the lifetime we axiomatically characterize classes of lifetime poverty indices and derive dominance conditions of poverty orderings for both individual and societal lifetime poverty measurements

marginal commodity tax reforms a survey as noted 30 years ago by martin feldstein optimal taxes may be useless for practical purposes and emphasis should instead be placed on the possibility of enhancing welfare by reforming existing tax rates in this perspective marginal commodity tax reforms are gaining increasing attention due to political and economic constraints on large reforms of direct or indirect taxation in this paper we summarize the main features and results of the literature on marginal commodity tax reforms pioneered by ahmad and stern further developed by yitzhaki and thirsk and recently reinterpreted by makdissi and wodon we establish new links to other fields of research namely the literature on the use of equivalence scales and on poverty measurement we also critically examine some issues associated with the implementation of marginal tax reforms with special reference to the calculation of welfare weights and revenue effects finally we suggest directions for future research on poverty reducing commodity tax reforms

financial globalization financial crises and contagion abstract two observations suggest that financial globalization played an important role in the recent financial crisis first more than half of the rise in net borrowing of the u s non financial sectors since the mid 1980s has been financed by foreign lending second the collapse of the u s housing and mortgage backed securities markets had worldwide effects on financial institutions and asset markets using an open economy model where financial intermediaries play a central role we show that financial integration leads to a sharp rise in net credit in the most financially developed country and to large asset price spillovers of country specific shocks to bank capital the impacts of these shocks on asset prices are amplified by bank capital requirements based on mark to market

social indicators and comparisons of living standards abstract construction of an international index of standards of living incorporating social indicators and economic output typically involves scaling and weighting procedures that lack welfare economic foundations revealed preference axioms can be used to make quality of life comparisons if we can estimate the representative household s production technology for the social indicators this method is applied to comparisons of gross domestic product gdp and life expectancy for 58 countries neither gdp rankings nor the rankings of the human development index hdi are consistent with the partial ordering of revealed preference a method of constructing a utility consistent index incorporating both consumption and life expectancy is suggested

tastes and technology in a two country model of the business cycle explaining international trade on international financial markets allows people to insure country specific risk and smooth consumption intertemporally equilibrium models of business cycles with trade on global financial markets typically yield international consumption correlations near one and excessive volatility of investment the authors incorporate nontraded goods in the model and find that the implications for aggregate consumption investment and the trade balance are consistent with business cycle properties of industrialized countries however the model driven by technology shocks alone yields counterfactual implications for comovements between consumption and prices at the sectoral level taste shocks produce price quantity relationships more consistent with the data copyright 1995 by american economic association

multivariate measures of well being and an analysis of inequality in the michigan data we demonstrate a multidimensional approach for combining several indicators of well being including the traditional money income indicators this methodology avoids the difficult and much criticized task of computing imputed incomes for such indicators as net worth and schooling inequality in the proposed composite measures is computed using relative inequality indexes that permit simple analysis of both the contribution of each welfare indicator and its factor components and within and between components of total inequality when the population is grouped by income levels age gender or any other criteria the analysis is performed on u s data using the michigan survey of income dynamics

multivariate decisions with unknown price vector abstract we consider a class of decision makers who have to choose among different random bundles of commodities it is assumed that they maximize expected utility and their utility functions depend only on the monetary value of the bundles of commodities stochastic dominance conditions are provided when the price vector is assumed unknown risk aversion and constraints on the price vectors are considered as particular cases the results are compared with other approaches to multivariate decisions

aggregate consumer behaviour and the measurement of inequality this paper presents an approach to inequality measurement based on an econometric model of aggregate consumer behaviour the novel feature of this model is that systems of individual demand functions can be recovered uniquely from the system of aggregate demand functions we present methods for evaluating social welfare based on an explicit social welfare function this social welfare function incorporates measures of individual welfare based on indirect utility functions for all consumer units we develop indexes of inequality based on actual and potential levels of social welfare

trends in the transitory variance of male earnings methods and evidence we estimate the trend in the transitory variance of male earnings in the united states using the michigan panel study of income dynamics from 1970 to 2004 using an error components model and simpler but only approximate methods we find that the transitory variance started to increase in the early 1970s continued to increase through the mid 1980s and then remained at this new higher level through the 1990s and beyond thus the increase mostly occurred about 30 years ago its increase accounts for between 31 and 49 percent of the total rise in cross sectional variance depending on the time period

assessing individual income growth we develop methods for describing distributions of income growth across individuals and for comparing changes in growth distributions over time the methods include graphical devices income growth profiles and dominance conditions and also summary indices together with associated methods of estimation and inference taking an explicitly longitudinal perspective our approach illuminates clearly who are the gainers and the losers and also provides distributionally sensitive assessments ones that allow the income growth for different individuals to be weighted differently our empirical application shows that the pattern of income growth in britain over the period 1992 1996 was less pro poor than that for 1998 2002 and not significantly different from the pattern for 2001 2005

efficiency and equity in private and public education a nonparametric comparison we present a nonparametric approach for 1 efficiency and 2 equity evaluation in education firstly we use a nonparametric data envelopment analysis model that is specially tailored to assess educational efficiency at the pupil level the model accounts for the fact that typically minimal prior structure is available for the behavior objectives and feasibility set under evaluation it allows for uncertainty in the data while it corrects for exogenous environmental characteristics that are specific to each pupil secondly we propose two multidimensional stochastic dominance criteria as naturally complementary aggregation criteria for comparing the performance of different school types private and public schools while the first criterion only accounts for efficiency the second criterion also takes equity into consideration the model is applied for comparing private but publicly funded and public primary schools in flanders our application finds that no school type robustly dominates another type when controlling for the school environment and taking equity into account more generally it demonstrates the usefulness of our nonparametric approach which includes environmental and equity considerations for obtaining fair performance comparisons in the public sector context

welfare analysis of tax reforms using household data abstract this paper discusses a methodology for calculating the distribution of gains and losses from a policy change using data for a large sample of households estimates are based on the equivalent income function which is money metric utility defined over observable variables this enables calculations to be standardised and a computer program to compute the statistics presented in the paper is available for a general demand system equivalent income is related to measures of deadweight loss and standard errors are computed for each of the welfare measures an application to u k data for 5 895 households is given which simulates a reform that involves eliminating housing subsidies

differential mortality and social security this paper studies the normative problem of redistribution between individuals who differ in their lifespans we discuss aspects related to the objective function and argue that aversion to multiperiod inequality should be taken into account then we study the properties of the social optimum both with full information and with asymmetric information we highlight the role of aversion to multiperiod inequality and show that it has substantial consequences on the design of social security schemes in particular we show that for a low resp high aversion to multiperiod inequality a negative resp positive implicit tax rate on continued activity is desirable

macroeconomic interdependence under incomplete markets this paper uses a two country flexible price model with overlapping generations of infinitely lived households to study the role of net foreign asset dynamics in the propagation of productivity shocks absence of ricardian equivalence ensures existence of a unique steady state level of net foreign assets to which the economy returns following temporary shocks model dynamics are significantly different from those of a setup in which terms of trade movements perform all the international adjustment and net foreign assets do not move the difference relative to a complete markets economy in which net foreign asset movements play no role in shock transmission is smaller it is amplified if the substitutability across goods rises and if shocks are permanent

sorting it out international trade with heterogeneous workers each worker brings a bundle of skills to the workplace for example quantitative and communication skills since employers must take this bundle as a package deal they choose workers with just the right mix of skills we show that international differences in the distribution of worker skill bundles for example japan s abundance of workers with a modest mix of both quantitative and teamwork skills have important implications for international trade industrial structure and domestic income distribution formally we model two dimensional worker heterogeneity and show that the second moments of the distribution of skills are critical as in the roy model

keeping up with the joneses and optimal diversification abstract peer effects have been shown to affect behavior and can generally lead to investments choices that are mean variance inefficient this paper analyzes optimal diversification with peer effects we show that if individuals have keeping up with the joneses preferences and they take their peer group reference as the market portfolio markowitz s mean variance efficiency analysis and the capm equilibrium are intact this holds for any keeping up preferences as well as heterogeneous combinations of such preferences these results also extend to the merton levy segmented market model

wellbeing inequality and preference heterogeneity standard measures of multidimensional inequality implicitly assume common preferences for all individuals and hence are not sensitive to preference heterogeneity among the members of society in this paper we measure the inequality of the distribution of equivalent incomes which is a preference sensitive multidimensional well being measure to quantify the contribution of preference heterogeneity to well being inequality we use a decomposition method that calculates well being inequality in different counterfactual distributions we focus on four sources of well being inequality the correlation between outcomes and preferences the preference heterogeneity the correlation between the outcome dimensions and the inequality within each of the outcome dimensions we find that preference heterogeneity accounts for a considerable part of overall well being inequality in russia for the period of 1995 to 2005 this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

income inequality and the labour market in britain and the us abstract we study household income inequality in both great britain and the united states and the interplay between labour market earnings and the tax system while both britain and the us have witnessed secular increases in 90 10 male earnings inequality over the last three decades this measure of inequality in net family income has declined in britain while it has risen in the us to better understand these comparisons we examine the interaction between labour market earnings in the family assortative mating the tax and welfare benefit system and household income inequality we find that both countries have witnessed sizeable changes in employment which have primarily occurred on the extensive margin in the us and on the intensive margin in britain increases in the generosity of the welfare system in britain played a key role in equalizing net income growth across the wage distribution whereas the relatively weak safety net available to non workers in the us mean this growing group has seen particularly adverse developments in their net incomes

new directions for stochastic open economy models the paper develops a simple stochastic new open economy macroeconomic model based on sticky nominal wages explicit solution of the wage setting problem under uncertainty allows one to analyze the effects of the monetary regime on welfare expected output and the expected terms of trade despite the potential interplay between imperfections due to sticky wages and monopoly the optimal monetary policy rule has a closed form solution to motivate our model we show that observed correlations between terms of trade and exchange rates are more consistent with our traditional assumptions about nominal rigidities than with a popular alternative based on local currency pricing 2000 elsevier science b v all rights reserved

hunger inequality ethics and aid abstractthis article considers the inequality in the cross country distribution of hunger using multiple ethical underpinnings under sovereign equality each nation state receives equal weighting leading to the conclusion that hunger should be concentrated in a few large countries under the democratic ethic individuals receive equal weighting and the global distribution of hungry people is irrelevant inequality aversion deliberately prefers equal levels of hunger across countries these ideals are presented in a general social welfare function and compared to the actual changes in hunger during 1991 2001 the distribution of food aid to reduce both hunger and hunger inequality are considered

empirical measurement of horizontal inequity abstract horizontal inequity is the unequal treatment of equals a crucial problem arising when measuring its extent is how should differential treatment which has some equity justification be distinguished from that which does not the literature to date has suggested that genuine equals can be identified and thence the problem solved by adjusting incomes prior to calculations using equivalence scales the paper argues that there are some good reasons for considering an alternative approach labelled partial symmetry in this the emphasis is on measuring horizontal inequity within each group of households with the same equity relevant characteristics rather than on adjusting incomes and then using the same measure for all households in the population the approaches are compared theoritically with reference to summary indices based on the generalised entropy family and to the conditions required to make partial orderings of different redistributions exploratory empirical work suggests there has been a substantial reduction in the horizontal inequity of u k direct taxes between 1976 and 1981 whichever approach is used the sources of the inequity observed are analysed in detail

counting and multidimensional poverty measurement this paper proposes a new methodology for multidimensional poverty measurement consisting of an identification method k that extends the traditional intersection and union approaches and a class of poverty measures m our identification step employs two forms of cutoff one within each dimension to determine whether a person is deprived in that dimension and a second across dimensions that identifies the poor by counting the dimensions in which a person is deprived the aggregation step employs the fgt measures appropriately adjusted to account for multidimensionality the axioms are presented as joint restrictions on identification and the measures and the methodology satisfies a range of desirable properties including decomposability the identification method is particularly well suited for use with ordinal data as is the first of our measures the adjusted headcount ratio we present some dominance results and an interpretation of the adjusted headcount ratio as a measure of unfreedom examples from the us and indonesia illustrate our methodology

the dual approach for measuring multidimensional deprivation theory and empirical evidence abstract this paper is concerned with the problem of ranking and quantifying the extent of deprivation in multidimensional distributions of dichotomous deprivation variables to this end we introduce a family of measures of deprivation justified on the basis of dual social evaluation functions two alternative criteria of second degree deprivation count distribution dominance are shown to divide the proposed family of deprivation measures into two separate subfamilies which can be justified by a combination of correlation increasing and count neutral rearrangements based on eu silc data we show that application of the proposed measures might lead to conclusions that differ from those attained by standard cut off measures and that results based on cut off measures are more sensitive to the choice of specific measure

ethically robust comparisons of bidimensional distributions with an ordinal attribute abstract we provide foundations for robust normative evaluation of distributions of two attributes one of which is cardinally measurable and transferable between individuals and the other is ordinal and non transferable the result that we establish takes the form of an analogue to the standard hardy littlewood polya theorem for distributions of one cardinal attribute more specifically we identify the transformations of the distributions which guarantee that social welfare increases according to utilitarian unanimity provided that the utility function is concave in the cardinal attribute and that its marginal utility with respect to the same attribute is non increasing in the ordinal attribute we establish that this unanimity ranking of the distributions is equivalent to the ordered poverty gap quasi ordering introduced by bourguignon 12 finally we show that if one distribution dominates another according to the ordered poverty gap criterion then the former can be derived from the latter by means of an appropriate and finite sequence of such transformations

how much of observed economic mobility is measurement error iv methods to reduce measurement error bias with an application to vietnam research on economic growth and inequality inevitably raise issues concerning economic mobility because the relationship between long run inequality and short run inequality is mediated by income mobility for a given level of short run inequality greater mobility implies lower long run inequality yet empirical measures of both inequality and mobility are biased upward due to measurement error in income and expenditure data collected from household surveys this paper presents a straightforward method to remove this bias using instrumental variable estimates the method is applied to panel data from vietnam the results imply that at least 15 and perhaps as much as 42 of measured mobility is upward bias due to measurement error the results also suggest that measurement error accounts for at least 12 of measured inequality

relative price changes and inequality in the size distribution of various components of income this article uses a comprehensive model of economic inequality to examine the impact of relative price changes on inequality in the marginal distributions of various income components in which the marginal distributions are derived from a multidimensional joint distribution the multidimensional joint distribution function is assumed to be a member of the pearson type vi family that is it is assumed to be a beta distribution of the second kind the multidimensional joint distribution is so called because it is a joint distribution of components of income and expenditures on various commodity groups gini measures of inequality are devised from the marginal distributions of the various income components the inequality measures are shown to depend on the parameters of the multidimensional joint distribution it is then shown that the parameters of the multidimensional joint distribution depend on the relative prices of various commodity groups and several other specified exogenous variables thus knowle

financial liberalization private investment and portfolio choice financialization of real sectors in emerging markets abstract using firm level panel data we analyze the impacts of rates of return gap between financial and fixed investments under uncertainty on real investment performance in three emerging markets argentina mexico and turkey employing a portfolio choice model to explain the low fixed investment rates in developing countries during the 1990s we suggest that rather than investing in irreversible long term fixed investments firms may choose to invest in reversible short term financial investments depending on respective rates of returns and the overall uncertainty in the economy the empirical results show that increasing rates of return gap and uncertainty have an economically and statistically significant fixed investment reducing effect while the opposite is true with respect to financial investments

financial intermediation resource allocation and macroeconomic interdependence abstract during the first decade of the euro southern countries experienced a boom bust cycle in bank lending non tradable sector growth and capital inflows i develop a quantitative open economy model of banking that is consistent with the banks behavior in credit allocation and foreign borrowing observed in spanish data i illustrate how movements in the frictions of cross border deposits generate an endogenous asymmetric allocation of bank credit toward non traded sectors while producing a persistent and climbing current account deficit a common central bank s unconventional policies in response to sudden stops are successful at ameliorating the downturn

labor supply decisions human capital attributes and inequality in the size distribution of earnings in the u s 1952 81 this paper analyzes the impact of human capital and labor force variables and macroeconomic growth measures on inequality in the size distribution of earnings for the united states our technique utilizes a beta distribution of the second kind to approximate the distribution of earnings we derive a measure of inequality that depends solely on the parameters of the beta distribution and that links human capital labor force and macroeconomic variables to changes in the parameters of the beta distribution we then relate the changing parameters of the beta distribution to changes in the degree of inequality in the marginal distribution of earnings

tagging and taxing the optimal use of categorical and income information in designing tax transfer schemes this paper explores aspects of the optimal design of tax transfer schemes that involve elements of both tagging the use of categorical benefits and means testing income relation of benefits simulations suggest a striking qualitative dissimilarity between the group specific schedules optimally imposed on poorer and richer groups broadly speaking the optimal marginal tax rate is decreasing in income among the latter but increasing among the former this latter observation potentially important for policy runs counter to the conventional wisdom from previous simulations the reconciliation we argue lies in the role played in optimal tax design by the revenue constraint

unveiling the ethics behind inequality measurement dalton s contribution to economics this article assesses the importance of dalton s 1920 paper in the economic journal for subsequent developments in income distribution analysis

price index dispersion and utilitarian social evaluation the living standard indicator in utilitarian social evaluation functions usef is the ratio of a nominal living standard and a price index we show that under weak association of price indices and nominal living standards and usual concavity conditions on utility functions utilitarian social welfare increases with price index dispersion when the aggregate price level is superior to the arithmetic mean of price indices and diminishes when it is inferior to the harmonic mean

measures of distributional change an axiomatic approach in recent years a number of interesting papers have appeared in the general field of the analysis of changes in a frequency distribution the most common applications of such analysis are in the areas of income and wealth re distribution and the contributions have usually focussed on a particular specialised issue such as mobility of individuals within a structure or of horizontal inequity as opposed to vertical inequality implicit in the comparison of two distributions a number of approaches to each of these problems have been suggested and indeed several specific practical indices of mobility or inequity have been proposed 1 whilst some of these can be shown to have very useful features in their application it is probably fair to say that most derive from an ad hoc approach to the particular aspect of the problem on which the author had focussed it is interesting to note that comparatively few papers attempt to exploit the similarities involved in each of these issues all this contrasts rather sharply with the state of play in an obviously closely related game that of the measurement of inequality much of the essential foundation of the problem of measuring inequality as we presently understand it seems to be more or less sorted out in a systematic fashion roughly speaking what may be done is as follows given

constant increasing and decreasing risk aversion with many commodities the arrow 1971 pratt 1964 theory of risk aversion has achieved important successes in the study of economic responses to risk this theory applies to a special class of cases in which the von neumann morgenstern expected utility hypothesis is used to explain these responses under this hypothesis individuals who maximize the expected utility of different utility functions will in general make different choices in the face of uncertainty for the purpose of predicting which of two different utility functions will lead to locally more risk averse economic behaviour the essential feature of these functions is their associated arrow pratt absolute risk aversion measures in fact the local comparisons can be extended to global comparisons if the arrow pratt absolute measures are uniformly comparable the arrow pratt measure of absolute risk aversion and a closely related measure of relative risk aversion also play crucial roles in the investigation of changes induced by wealth increases in the risk taking behaviour of a single expected utility maximizing individual this study has resulted in a satisfactory theory of increasing decreasing and constant absolute and relative risk aversion the special cases to which the arrow pratt theory is directly applicable are those in which the utility functions in question are functions of a single variable e g wealth unfortunately the models required to explain many economic decisions employ a version of the expected utility hypothesis in which the argument of the utility function is a multidimensional vector one example arises in the study of the consumption savings decision another occurs in the analysis of the combined consumption savings portfolio decision a final example is obtained in the investigation of demand for goods of uncertain quality the papers of kihlstrom mirman 1974 and diamond stiglitz 1974 have suggested a partial generalization of the arrow pratt theory of absolute risk aversion this

health and income a robust comparison of canada and the us abstract this paper uses sequential stochastic dominance procedures to compare the joint distribution of health and income across space and time it is the first application of which we are aware of methods to compare multidimensional distributions of income and health using procedures that are robust to aggregation techniques the paper s approach is more general than comparisons of health gradients and does not require the estimation of health equivalent incomes we illustrate the approach by contrasting canada and the us using comparable data canada dominates the us over the bottom part of the bi dimensional distribution of health and income though not generally over the uni dimensional distributions of health or income the paper also finds that welfare for both canadians and americans has not unambiguously improved during the last decade over the joint distribution of income and health in spite of the fact that the uni dimensional distributions of income have clearly improved during that period

multivariate decision making under risk aversion abstract this paper develops new multivariate stochastic dominance rules for the class of all risk averse decision makers in which the separation of preferences over commodity bundles from attitudes toward risk is made explicit

vulnerability to multidimensional poverty peru 1998 2002 summary we approach multidimensional poverty from the viewpoint of a forward looking risk averse household we consider the fear to face hardship in any well being dimension as a relevant form of deprivation since peace of mind is also a component of overall well being we are thus concerned with vulnerability to multidimensional poverty as we discuss how such vulnerability should be measured we find that attention must be paid not only to how well being dimensions correlate over a given population but also to how they correlate over the states of the world data from peru illustrate

opportunities welfare and social justice a review of fishkin s bottlenecks in his bottlenecks a new theory of equal opportunity joseph fishkin claims he presents an entirely new way of thinking about equality of opportunity the core of the new theory is the call for opportunity pluralism which consists in enlarging the range of opportunities available to people at every stage in life in this essay we discuss how successful fishkin is at shaking the way economists think about equality of opportunity we identify two aspects of fishkin s theory that deeply conflict with economic theories of equality of opportunity those aspects have to do with the way economists interpret the ethical values of respect for preferences and responsibility we also argue that the way fishkin suggests to look at opportunities can help economists fill gaps in the way they define well being and social justice

inequality of wellbeing a multidimensional approach an important aspect of multidimensional wellbeing distributions is the correlation between different dimensions we propose two indices for measuring multidimensional inequality derived from two underlying social evaluation functions these functions aggregate both across dimensions and across individuals the social evaluation functions differ only with respect to the sequencing of aggregation aggregating first across dimensions is more attractive since it allows the inequality index to depend on the correlation between dimensions we illustrate both indices and the impact of correlation sensitivity using russian household data between 1995 and 2005 for four dimensions of wellbeing expenditure health schooling and housing quality

dynamics of the trade balance and the terms of trade the j curve the authors provide a theoretical interpretation of two features of international data the countercyclical movements in net exports and the tendency for the trade balance to be negatively correlated with current and future movements in terms of trade but positively correlated with past movements they document the same properties in a two country stochastic growth model in which trade fluctuations reflect in large part the dynamics of capital formation the authors find that their general equilibrium perspective is essential the relation between the trade balance and the terms of trade depends critically on the source of fluctuations copyright 1994 by american economic association

the evolution of world inequality in well being in this paper we use the tools offered by the recent literature on multidimensional inequality measurement to investigate the evolution of the inequality in well being across different countries during 1975 2000 we focus on three important dimensions of life standard of living health and education inequality in the three dimensions shows a different trend during 1975 2000 we propose a flexible measure of well being to quantify the evolution of overall intercountry well being inequality the empirical results are sensitive to different normative choices on the trade offs between the different dimensions especially the concave transformation of income turns out to be decisive for the evolution of world inequality in well being

multidimensional welfare distributions empirical application to household panel data from vietnam this article explores the empirical application of theoretical multidimensional welfare distribution analysis techniques to real household welfare distributions the article operationalizes recent conceptual developments in multidimensional distribution theory and assesses their usefulness for the measurement of multidimensional household inequality the results strongly highlight the importance of bringing nonmonetary aspects of household welfare into the forefront of inequality analysis agreement over the various approaches to the measurement of multidimensional inequality entails however nontrivial decisions that may limit the practical usefulness of these measures we suggest that the use of multidimensional inequality ranges and the application of restrictive dominance criteria to multidimensional welfare distributions may open significant scope for further developments in the empirical analysis of multidimensional inequality

twenty years of rising inequality in u s lifetime labour income values in this paper we study the evolution of lifetime labour income inequality by constructing present value life cycle measures that incorporate both earnings and employment risk we find that even though lifetime income inequality is 40 less than earnings inequality the total increase in lifetime income inequality over the past 20 years is the same as earnings inequality while the total increase is the same the pathways there differ with earnings inequality experiencing a steady increase and lifetime income inequality increasing in spurts particularly in the latter half of the 1990s finally we find the changes in lifetime income inequality are primarily driven by changes in earnings mobility and changes in the earnings distribution itself changes in employment risk and the composition of the sample such as the shift toward attaining more education and the ageing population do not play a large role 2004 the review of economics studies limited

clusters of attributes and well being in the usa using arima models and entropy the dynamic evolution of several functions of aggregate income and other attributes of well being is analysed for statistical similarity in order to determine potentially distinct dimensions in multidimensional analysis of welfare and quality of life in the usa the entropy metric compares entire distributions and is more general than principal components and other correlation based techniques for clustering to help macroeconomic policy makers we compare the distribution of several composite measures of well being which include income with the distribution of some common measures of aggregate income over the period 1915 1995 per capita disposable income and growth in gnp are statistically distinct dimensions of well being copyright 2001 john wiley sons ltd

dalton improving tax reform when households differ in ability and needs abstract in a previous paper we suggested a method for identifying tax reforms that adhere to dalton s principle of transfers approving a small enough transfer from rich to poor however even the weak requirement from that method namely prescribing a uni dimensional ordinal ranking of households by how deserving they are of a marginal income transfer is con fining here we extend the approach by formulating a two dimensional criterion for a dalton improving tax reform when there is social approval for transfers when other things are equal from the more able to the less able and from less needy households to more needy ones the possibility of applying this extended criterion in practice and a comparison with other criteria is carried out using the example of u k excise taxes

what do normative indices of multidimensional inequality really measure we argue that normative indices of multidimensional inequality do not only measure a distribution s extent of inequity i e the gaps between the better off and the worse off but also its extent of inefficiency i e the non realized mutually beneficial exchanges of goods we provide a decomposition that allows quantifying these two parts of inequality exact formulas of the inequity and inefficiency components are provided for a generic class of social welfare functions the inequity component turns out to be a two stage measure which applies a unidimensional inequality measure to the vector of well being levels we critically discuss two prominent transfer principles viz uniform majorization and correlation increasing majorization in the light of the decomposition a decomposition of inequality in human development illustrates the analysis

on the evaluation of economic mobility this paper presents a framework for the evaluation and measurement of reversal and origin independence as separate aspects of economic mobility we show how that evaluation depends on aversion to multi period inequality aversion to inter temporal fluctuations and aversion to future risk we construct extended atkinson indices that allow us to quantify the relative impact of reversal and origin independence on welfare we apply our approach to the comparison of income mobility in germany and in the united states when aversion to inequality is the only consideration the us gains more from mobility than germany this reflects similar gains from reversal in the two countries but greater gains in the us from origin independence the introduction of aversion to intertemporal fluctuations and aversion to future risk makes the impact of mobility in the two countries more similar

inequality and welfare in market economies abstract atkinson 1970 and kolm 1969 have shown how lorenz ranking of distributions of a fixed amount of income or a single commodity may correspond to social welfare rankings lower inequality indicates higher social welfare atkinson and bourguignon 1982 and kolm 1977 offer two ways of extending this result to multi commodity environments we investigate an alternative approach based on the existence of markets and market prices at which agents maximize utility our main result offers a welfare based method of making real national income comparisons which takes into account the distribution of individual welfare

the pareto principle of optimal inequality the pareto principle is often viewed as a mild requirement compatible with a variety of value judgements in particular it is generally thought that it can accommodate different views on the desirable degree of equality we show that this is generally not true in intertemporal models where some uncertainty prevails to do so we formalize the concept of inequality aversion we show that different degrees of inequality aversion are not possible in typical models of time consistent dynamic decision under uncertainty

global implications of national unconventional policies abstract financial integration in the markets for banks assets and liabilities makes balance sheet constraints highly correlated across countries resulting in a high degree of financial and macroeconomic interdependence likewise under financial integration unconventional policies aimed at stabilizing domestic financial and credit conditions could entail large international spillovers therefore stabilization by one country will also benefit other countries reducing incentives to implement credit policies in a classic free riding problem especially when these policies entail domestic costs we show that this outcome can emerge in an open economy model featuring financial intermediaries that face endogenously determined balance sheet constraints

the possibility of social choice the subject of social choice includes within its capacious frame various problems with the common feature of relating social judgments and group decisions to the views and interests of the individuals who make up the society or the group some challenges and foundational problems faced by social choice theory as a discipline are discussed social choice theory is a subject in which formal and mathematical techniques have been very extensively used voting based procedures are entirely natural for some kinds of social choice problems such as elections referendums or committee decisions they are however altogether unsuitable for many other problems of social choice impossibility results in social choice theory led by the pioneering work of arrow 1951 have often been interpreted as being thoroughly destructive of the possibility of reasoned and democratic social choice including welfare economics that view is argued against

securitization risk transferring and financial instability the case of spain abstract the 2007 2010 financial crisis has hit a variety of countries asymmetrically the case of spain is particularly illustrative as it exemplifies in a vivid manner most of the core issues largely responsible for the crisis this country experienced a pronounced housing bubble partly funded via spectacular developments in its securitization markets leading to looser credit standards and subsequent financial stability problems we analyze the sequential deterioration of credit in spain considering rating changes in securitized deals using a sample of 20 286 observations on securities and rating changes from 2000q1 to 2010q1 we build a model in which loan growth on balance sheet credit quality and rating changes are estimated simultaneously our results suggest that loan growth significantly affects on balance sheet loan performance with a lag of at least two years additionally loan performance is found to explain rating changes with a lag of four quarters importantly bank characteristics in particular observed solvency cash flow generation and cost efficiency also affect ratings considerably additionally these other bank characteristics seem to a higher weight in the rating changes of securities issued by savings banks as compared with commercial banks

comparisons of heterogeneous distributions and dominance criteria abstract we are interested in the comparisons of standard of living across societies when observations of both income and household structure are available we generalise the approach of a b atkinson and f bourguignon 1987 3 to the case where the marginal distributions of needs can vary across the household populations under comparison we assume that a sympathetic observer uses a utilitarian social welfare function in order to rank heterogeneous income distributions insofar as any individual can play the role of the observer we take the unanimity point of view according to which the planner s judgements have to comply with a certain number of basic normative principles we impose increasingly restrictive conditions on the household s utility function and we investigate their effects on the resulting rankings of the distributions this leads us to propose four dominance criteria that can be used for providing an unambiguous ranking of income distributions for heterogeneous populations

do monetary and nonmonetary indicators tell the same story about chronic poverty a study of vietnam in the 1990s this paper investigates whether monetary and nonmonetary indicators tell the same story about chronic poverty using a unique panel data from vietnam in the 1990s defining chronic poverty as occurring when an individual is monetarily poor stunted malnourished or out of school in both waves of the panel the overlap and correlation between subgroups of the chronically poor are shown to be modest some but not all nonmonetary indicators are more persistent and complement monetary indicators of chronic poverty taking account of the multiple dimensions of chronic poverty cannot be a simple additive exercise

prioritarian poverty comparisons with cardinal and ordinal attributes the ethical view of prioritarianism holds the following if an extra bundle of attributes is to be allocated to either of two individuals then priority should be given to the worse off among the two we consider multidimensional poverty comparisons with cardinal and ordinal attributes and propose three axioms that operationalize the prioritarian view each priority axiom in combination with a handful of standard properties characterizes a class of poverty measures this article is protected by copyright all rights reserved

welfare as equity equivalents equity or its counterpart inequity plays a fundamental role in the evaluation of social welfare in different dimensions in this paper we revisit the concept of inequity in the sense of unequal distributions across individuals time and states of the world using a unified framework that generalizes the standard expected discounted utilitarianism approach we propose a general measure of welfare as equity equivalents and a corresponding inequity index we show that allowing for different attitudes toward inequity across different dimensions covers a scope of possible inequity preferences with different interpretations we then prove that the order of aggregation across the different dimensions matters for welfare evaluations finally we show that many of the welfare theoretical approaches recently developed in the literature can be interpreted as special cases of this general framework

the lucky few amidst economic decline distributional change in cote d ivoire as seen through panel data sets 1985 88 this article is an exploratory exercise in using panel data sets to investigate distributional change in cote d ivoire during the second half of the 1980s the panels made it possible to highlight and quantify mobility of the same households across poverty classes over time we found that there were a lucky few who improved their standard of living amid general decline detailed investigations revealed that the lucky few were fairly numerous and the probability of escaping poverty was quite high even for the very poorest these lucky few were widespread regionally although in some socio economic groupings the poor had higher chances of escaping poverty

the comparison of multi dimensioned distributions of economic status the literature on inequality measurement has been largely concerned with single dimensioned indicators this paper explores some of the issues which arise when there are several dimensions to inequality and these are not readily reduced to a single index concentrating particularly on the two dimensioned case we make use of results on multi variate stochastic dominance in portfolio theory extending these and applying them to the measurement of inequality the use of the dominance conditions is illustrated by an application to the international distribution of income and life expectancy

defining health inequality why rawls succeeds where social welfare theory fails while there has been an important increase in methodological and empirical studies on health inequality not much has been written on the theoretical foundation of health inequality measurement we discuss several reasons why the classic welfare approach which is the foundation of income inequality analysis fails to provide a satisfactory foundation for health inequality analysis we propose an alternative approach which is more closely linked to the who concept of equity in health and is also consistent with the ethical principles espoused by rawls a theory of justice harvard university press cambridge ma 1971 this approach in its simplest form is shown to be closely related to the concentration curve when health and income are positively related thus the criteria presented in our paper provide an important theoretical foundation for empirical analysis using the concentration curve we explore the properties of these approaches by developing policy scenarios and examining how various ethical criteria affect government strategies for targeting health interventions

an experimental test of the concentration index the concentration index is widely used to measure income related inequality in health no insight exists however whether the concentration index connects with people s preferences about distributions of income and health and whether a reduction in the concentration index reflects an increase in social welfare we explored this question by testing the central assumption underlying the concentration index and found that it was systematically violated we also tested the validity of alternative health inequality measures that have been proposed in the literature our data showed that decreases in the spread of income and health were considered socially desirable but decreases in the correlation between income and health not necessarily support for a condition implying that the inequality in the distribution of income and in the distribution of health can be considered separately was mixed

takeover threats and managerial myopia this paper examines the familiar argument that takeover pressure can be damaging because it leads managers to sacrifice long term interests in order to boost current profits if stockholders are imperfectly informed temporarily low earnings may cause the stock to become undervalued increasing the likelihood of a takeover at an unfavorable price hence the managerial concern with current bottom line the magnitude of the problem depends on a variety of factors including the attitudes and beliefs of shareholders the extent to which corporate raiders have inside information and the degree to which managers are concerned with retaining control of their firms

a penny for your quotes patent citations and the value of innovations the use ofpatents in economic research has been seriously hindered by the fact that patents vary enormously in their importance or value and hence simple patent counts cannot be informative about innovative output the purpose of this article is to put forward patent counts weighted by citations as indicators of the value of innovations thereby overcoming the limitations of simple counts the empirical analysis of a particular innovation computed tomography scanners indeed shows a close association between citation based patent indices and independent measures of the social value of innovations in that field moreover the weighting scheme appears to be nonlinear increasing in the number of citations implying that the informational content of citations rises at the margin as in previous studies simple patent counts are found to be highly correlated with contemporaneous rd however here the association is within afield over time rather than cross sectional

intertemporal choice and consumption mobility the theory of intertemporal consumption choice makes sharp predictions about the evolution of the entire distribution of household consumption not just about its conditional mean in the paper we study the empirical transition matrix of consumption using a panel drawn from the bank of italy survey of household income and wealth we estimate the parameters that minimize the distance between the empirical and the theoretical transition matrix of the consumption distribution the transition matrix generated by our estimates matches remarkably well the empirical matrix both in the aggregate and in samples stratified by education our estimates strongly reject the consumption insurance model and suggest that households smooth income shocks to a lesser extent than implied by the permanent income hypothesis jel d52 d91 i30

international welfare comparisons and nonparametric testing of multivariate stochastic dominance this paper outlines a class of statistical procedures that permit testing of a broad range of multidimensional stochastic dominance hypotheses and more generally welfare hypotheses that rely upon multiple stochastic dominance conditions we apply the procedures to data on income and leisure hours for individuals in germany the uk and the usa we find that no country first order stochastically dominates the others in both dimensions for all years of comparison furthermore while in general the usa stochastically dominates germany and the uk with respect to income in most periods germany stochastically dominates with respect to leisure hours finally we find evidence that bivariate poverty which refers for example to the working poor that is those who have little leisure and low income is lower in germany than in either the uk or the usa on the other hand poverty comparisons between the uk and the usa are sensitive to the subpopulation of individuals considered copyright 2007 john wiley sons ltd

financialisation and the slowdown of accumulation over the past decades financial investment of non financial businesses has been rising and accumulation of capital goods has been declining the first part of the paper offers a novel theory to explain this phenomenon financialization the shareholder revolution and the development of a market for corporate control have shifted power to shareholders and thus changed management priorities leading to a reduction in the desired growth rate in the second part the link between accumulation and financialization is tested econometrically by means of a time series analysis of aggregate business investment for usa uk france and germany extensive test of robustness are performed for the first three countries evidence that confirms the negative effect of financialization on accumulation is found author s abstract

a welfare economics foundation for health inequality measurement the empirical literature on the measurement of health inequalities is vast and rapidly expanding to date however no foundation in welfare economics exists for the proposed measures of health inequality this paper provides such a foundation for commonly used measures like the health concentration index the gini index and the extended concentration index our results indicate that these measures require assumptions that appear restrictive one way forward may be the development of multi dimensional extensions

higher order risk attitudes a review of experimental evidence abstract this paper reviews the recent but fast growing experimental literature on higher order risk attitudes after introducing the theoretical context we first review the basic evidence and empirical moderators of these risk attitudes we then discuss recent extensions to ambiguity time risk and multi attribute utility in the last part we review indirect evidence from applied economic decision tasks

local versus global assessment of mobility mobility indices are popular tools designed to quantify the extent of income changes by aggregating local distributional change into a global scalar according to some rule for some mobility measures this aggregation rule is only implicit in their standard definition we derive an insightful approximation to the statistical aggregation rule for the important class of mobility indices introduced by shorrocks journal of economic theory 19 1978 376 93 and further generalized by maasoumi and zandvakili economic letters 22 1986 97 102 which enables us to characterize their normative properties we also develop methods for estimation and inference a substantive empirical contribution emerges from the comparison of mobility between the united states and germany our methods reveal why income mobility is higher in germany than in the united states higher german mobility in the bottom of the distribution is combined with an implicitly higher weighting by the mobility index at the bottom

robust multidimensional spatial poverty comparisons in ghana madagascar and uganda spatial poverty comparisons are investigated in three african countries using multidimensional indicators of well being the work is analogous to the univariate stochastic dominance literature in that it seeks poverty orderings that are robust to the choice of multidimensional poverty lines and indices in addition the study seeks to ensure that the comparisons are robust to aggregation procedures for multiple welfare variables in contrast to earlier work the methodology applies equally well to what can be defined as union intersection and intermediate approaches to dealing with multidimensional indicators of well being furthermore unlike much of the stochastic dominance literature this work computes the sampling distributions of the poverty estimators to perform statistical tests of the difference in poverty measures the methods are applied to two measures of well being the log of household expenditures per capita and children s height forage z scores using data from the 1988 ghana living standards study survey the 1993 national household survey in madagascar and the 1999 national household survey in uganda bivariate poverty comparisons are at odds with univariate comparisons in several interesting ways most important it cannot always be concluded that poverty is lower in urban areas in one region compared with that in rural areas in another even though univariate comparisons based on household expenditures per capita almost always lead to that conclusion

a multivariate analysis of the distribution of individual s welfare in china what is the role of health many economists have argued that income is an inadequate indicator of welfare in this paper we conduct a multivariate analysis of the distribution of individual welfare in china at three selected time points 1991 1997 and 2006 instead of using income as the only welfare indicator as in most distributional analyses we explicitly consider the role of health in welfare distribution we adopt the naga and geoffard 2006 decomposition method by which we can decompose a bidimensional welfare inequality index into two univariate atkinson kolm sen indices that measure the inequalities in health and income and a third term that measures the contribution from the joint distribution of the two attributes to total inequality we show that the third term might be used as an alternative to the concentration index to measure the income related inequality in health

to each according to markets tournaments and the matching problem with borrowing constraints we compare the performance of markets and tournaments as allocative mechanisms in an economy with borrowing constraints the economy consists of a continuum of individuals who differ in their initial wealth and ability level these must be assigned to a continuum of investment opportunities or inputs of different productivity with perfect capital markets matching is efficient under both mechanisms markets however generate higher aggregate consumption because of the waste associated with the production of signals under tournaments when borrowing constraints are present tournaments dominate markets in terms of matching efficiency and for sufficiently powerful signalling technologies also in terms of aggregate consumption

inequality among world citizens 1820 1992 this paper investigates the distribution of well being among world citizens during the last two centuries the estimates show that inequality of world distribution of income worsened from the beginning of the 19th century to world war ii and after that seems to have stabilized or to have grown more slowly in the early 19th century most inequality was due to differences within countries later it was due to differences between countries inequality in longevity also increased during the 19th century but then was reversed in the second half of the 20th century perhaps mitigating the failure of income inequality to improve in the last decades jel d31 f0 n0 o0

international comparisons of pricing to market behavior this paper measures the degree of price discrimination across export destinations that is associated with exchange rate changes using u s u k german and japanese industry level data given the industries sampled more price discrimination across destinations is observed in the u k german and japanese data for industries that match across source countries however behavior is very similar across source countries furthermore destination specific price adjustment on exports to the united states from germany and japan is similar to price adjustment observed on shipments to other destinations most variation in the data appears to be related to industry copyright 1993 by american economic association