DEPRIVATION, INEQUALITY AND WELFARE*

Satya Chakravarty

The Japanese Economic Review, 2009, vol. 60, issue 2, 172-190

Abstract: Welfare ranking of income distributions involves a trade‐off between equity and efficiency. A person's feeling of deprivation about higher incomes may be of a relative or absolute type. We consider an intermediate notion of deprivation, a convex mix of relative and absolute deprivations. We then look at the problem of welfare ranking of income distributions when welfare increases under a globally equitable redistribution and under an income increase that keeps intermediate deprivation fixed. All deprivation indices can be regarded as inequality indices but the converse is not true. We also provide a numerical illustration of our results.

Date: 2009
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https://doi.org/10.1111/j.1468-5876.2008.00430.x

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