The Distributional Change In Second-Degree Stochastic Dominance And Its Decomposition

Iltae Kim and Suyeol Ryu
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Iltae Kim: Chonnam National University
Suyeol Ryu: Busan Development Institute

Korean Economic Review, 2004, vol. 20, 263-274

Abstract: This paper introduces a new concept, a left-side strong second-degree stochastic dominance (L-SSSD) shift which includes a left-side strong increase in risk (L-SIR) shift and proves that an L-SSSD can be decomposed into an L-SIR and one subset of first-degree stochastic dominance (FSD) which is a subset of a monotone probability ratio (MPR). We show that one can obtain an intuitively appealing comparative statics result for L-SSSD shifts by using the risk preferences of risk-averse individuals with prudence.

Keywords: progressive income taxation; Labor supply response; piece-wise Linear budget constraint; 4 estimation; robustness of results; the Laffer curve (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Date: 2004
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