What do normative indices of multidimensional inequality really measure?
Koen Decancq () and
Erwin Ooghe ()
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Erwin Ooghe: Center for Economic Studies, KU Leuven, B-3000 Leuve, Belgium
No 2013035, CORE Discussion Papers from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)
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 quantifying these two parts of inequality. Exact formulas of the inequity and inefficiency components are provided for a generic class of social welfare functions. The inequity component turns out to be a two-stage measure, which applies a unidimensional inequality measure to the vector of well-being levels. We critically discuss two prominent transfer principles, viz., uniform majorization and correlation increasing majorization, in the light of the decomposition. A decomposition of inequality in human development illustrates the analysis.
Keywords: multidimensional inequality measurement; efficiency; uniform majorization; correlation increasing majorization (search for similar items in EconPapers)
JEL-codes: D31 D63 I31 (search for similar items in EconPapers)
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Journal Article: What do normative indices of multidimensional inequality really measure? (2015)
Working Paper: What do normative indices of multidimensional inequality really measure? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2013035
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