On Comparing Heterogenous Populations: is there really a Conflict between the Pareto Criterion and Inequality Aversion?

Bart Chapeau and Erwin Ooghe

Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

Abstract: The incompatibility between the Pareto indifference criterion and a concern for greater equality in living standards of heterogenous populations (see, amongst others, Ebert, 1995, 1997, Ebert and Moyes, 2003 and Shorrocks, 1995) might come as a surprise, since both principles are reconcilable when people differ only in income (homogenous population). We present two families of welfare rankings --(i) single parameter extensions of the generalized Lorenz dominance rule and (ii) a subset of Weymark's (1981) generalized Ginis-- and show how and why these rules resolve the paradox.

Keywords: heterogeneity; welfare comparisons. (search for similar items in EconPapers)
JEL-codes: D31 D63 I31 (search for similar items in EconPapers)
Date: 2004-03
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Citations: View citations in EconPapers (1)

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