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What do normative indices of multidimensional inequality really measure?

Kristof Bosmans, Koen Decancq () and Erwin Ooghe

Journal of Public Economics, 2015, vol. 130, issue C, 94-104

Abstract: 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 us to quantify these two parts of inequality. Strikingly, the inequity component turns out to be a two-stage measure, that is, a measure that applies a unidimensional inequality measure to the vector of individual well-being levels. The decomposition also clarifies existing controversies surrounding two prominent transfer axioms, viz., uniform majorization and correlation increasing majorization. An application to inequality in human development illustrates the analysis.

Keywords: Multidimensional inequality; Equity; Efficiency; Uniform majorization; Correlation increasing majorization (search for similar items in EconPapers)
JEL-codes: D31 D63 I31 (search for similar items in EconPapers)
Date: 2015
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Working Paper: What do normative indices of multidimensional inequality really measure? (2015)
Working Paper: What do normative indices of multidimensional inequality really measure? (2013) Downloads
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