Approximating unanimity orderings: An application to Lorenz dominance

Anthony Shorrocks and Daniel Slottje

Journal of Economics, 2002, vol. 77, issue 1, 117 pages

Abstract: Stochastic dominance and Lorenz dominance are examples of orderings which require unanimous agreement among an infinite set of indices. This paper considers various subsets of inequality measures that respect Lorenz dominance, and assesses the extent to which a small number of indices can reproduce the Lorenz ordering. Using income data for 80 countries, our results suggest that Lorenz dominance can be predicted with 99% accuracy using just 3 or 4 inequality measures, as long as two of them focus on the extreme upper and lower tails of the distribution. In contrast, confining attention to the index families and parameter ranges normally considered may fail to detect the majority of occasions when Lorenz curves intersect. These results lead us to question the faith placed in procedures based on a finite set of inequality indices, and to suggest that similar lessons will apply to other types of unanimity orderings. Copyright Springer-Verlag 2002

Keywords: Inequality; Lorenz Dominance; D63 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:77:y:2002:i:1:p:91-117

DOI: 10.1007/BF03052501

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