On The Motivation and Power of Stochastic Dominance Techniques for Multiple Wellbeing Comparisons

Gordon Anderson and Thierry Post

Working Papers from University of Toronto, Department of Economics

Abstract: Using the ethical concept of the Veil of Ignorance, social planners would consider well-being problems as decision making under risk, which provides a rationale for using 'Convex Stochastic Dominance' to compare well-being distributions. This approach yields more discriminating power than standard pairwise Stochastic Dominance comparisons in the face of a multitude of distributions from various time sub-periods and/or sub-populations. A Linear Programming test for 'Stochastic Dominance optimality' can be derived from the first principles of utility theory. This test casts new light on the modern history of the US income distribution.

Keywords: Stochastic Dominance; Wellbeing Analysis (search for similar items in EconPapers)
JEL-codes: C1 C6 I3 (search for similar items in EconPapers)
Pages: Unknown pages
Date: 2016-11-23
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Persistent link: https://EconPapers.repec.org/RePEc:tor:tecipa:tecipa-570

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