Well-being inequality and preference heterogeneity

Koen Decancq, Marc Flerubaey and Erik Schokkaert

No 543793, Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

Abstract: Standard measures of multidimensional inequality (implicitly) assume common preferences for all individuals and, hence, are not sensitive to preference heterogeneity among the members of society. In this paper, we measure the inequality of the distribution of equivalent incomes, which is a preference-sensitive multidimensional well-being measure. To quantify the contribution of preference heterogeneity to well-being inequality, we use a decomposition method that calculates well-being inequality in different counterfactual distributions. We focus on four sources of well-being inequality: the correlation between outcomes and preferences, the preference heterogeneity, the correlation between the outcome dimensions, and the inequality within each of the outcome dimensions. We find that preference heterogeneity accounts for a considerable part of overall well-being inequality in Russia for the period of 1995 to 2005.

Date: 2016-06
New Economics Papers: this item is included in nep-cis and nep-hap
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Published in Discussion paper series, DPS16.10 , pages 1-37

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Related works:
Journal Article: Wellbeing Inequality and Preference Heterogeneity (2017)
Working Paper: Wellbeing inequality and preference heterogeneity (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:543793

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