On the Measurement of Long-Term Income Inequality and Income Mobility

Rolf Aaberge and Magne Mogstad

No 4699, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper proposes a two-step aggregation method for measuring long-term income inequality and income mobility, where mobility is defined as an equalizer of long-term income. The first step consists of aggregating the income stream of each individual into a measure of permanent income, which accounts for the costs associated with income fluctuations and allows for credit market imperfections. The second step aggregates permanent incomes across individuals into measures of social welfare, inequality and mobility. To this end, we employ an axiomatic approach to justify the introduction of a generalized family of rank-dependent measures of inequality, where the distributional weights, as opposed to the Mehran-Yaari family, depend on income shares as well as on population shares. Moreover, a subfamily is shown to be associated with social welfare functions that have intuitively appealing interpretations. Further, the generalized family of inequality measures provides new interpretations of the Gini-coefficient.

Keywords: income inequality; income mobility; social welfare; Gini coefficient; permanent income; credit market; annuity (search for similar items in EconPapers)
JEL-codes: D71 D91 I32 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2010-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://docs.iza.org/dp4699.pdf (application/pdf)

Related works:
Working Paper: On the measurement of long-term income inequality and income mobility (2010)
Working Paper: On the measurement of long-term income inequality and income mobility (2010)
Working Paper: On the Measurement of Long-Term Income Inequality and Income Mobility (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp4699

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().