International Income Comparisons and Social Welfare: Methodology, Analysis, and Implications

Vivek Dehejia () and Marcel Voia

Journal of Globalization and Development, 2012, vol. 3, issue 1, 24

Abstract: This paper contributes to ongoing debates on international income comparisons by decomposing the income distribution functions for the United States and Canada over the period 1993 - 2000 using finite mixtures. We also conduct tests for equality, first, second and third order stochastic dominance to determine which, if either, country might exhibit greater social welfare, which in our baseline case we model simply as expected utility. Overall, our results suggest that Canada exhibits higher social welfare than U.S., principally because it exhibits lower income inequality, thereby confirming a conjecture by Joseph Stiglitz which was the motivation for our study.

Keywords: heterogeneous income distributions; social welfare; non-parametrics; finite mixtures; stochastic dominance (search for similar items in EconPapers)
Date: 2012
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Working Paper: International Income Comparisons and Social Welfare: Methodology, Analysis, and Implications (2012)
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DOI: 10.1515/1948-1837.1167

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