Comparing degrees of inequality aversion

Kristof Bosmans

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

Abstract: We propose a straightforward dominance procedure for comparing social welfare orderings (SWOs) with respect to the degree of inequality aversion they express. We consider three versions of the procedure: (i) a criterion based on the Lorenz quasi-ordering which we argue to be the ideal version, (ii) a criterion based on a minimalist concept of inequality, and (iii) a criterion based on the relative differentials quasi-ordering. It turns out that the traditional Arrow-Pratt approach is equivalent to the latter two criteria for important classes of SWOs, but that it is profoundly inconsistent with the Lorenz-based criterion. With respect to the problem of combining extreme inequality aversion and monotonicity, criteria (ii) and (iii) identify as extremely inequality averse a set of SWOs that includes leximin as a special case, whereas the Lorenz-based criterion concludes that extreme inequality aversion and monotonicity are incompatible.

Keywords: Inequality Aversion; Lorenz; Leximin; Maximin; Risk Aversion (search for similar items in EconPapers)
JEL-codes: D63 D81 (search for similar items in EconPapers)
Date: 2005-03
New Economics Papers: this item is included in nep-upt
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Related works:
Journal Article: Comparing degrees of inequality aversion (2007)
Working Paper: Comparing degrees of inequality aversion (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:ces0517

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