Decomposing Inequality and Social Welfare Changes: The Use of Alternative Welfare Metrics

John Creedy and Nicolas Hérault

No 1121, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: This paper presents two ‘non-welfarist’ approaches and one ‘welfarist’approach to decompose changes in inequality and social welfare into three components. We distinguish the contributions of population,tax policy and labour supply behavioural effects. As an illustration,we decompose changes in inequality and in values of a social welfare function in Australia between 2001 and 2006. Inequality is first defined in non-welfarist terms as a function of disposable income: the independent judge places no value on leisure. Then this is modified to allow for evaluations using a weighted geometric mean of disposable income and leisure. This is seen to modify the evaluation of changes in important ways. Furthermore, the results are shown to be quite different from those obtained using a ‘welfarist’ evaluation in terms of money metric utility, where separate behavioural effects cannot be isolated.

Pages: 34 pages
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://fbe.unimelb.edu.au/__data/assets/pdf_file/0006/784257/1121.pdf (text/html)

Related works:
Working Paper: Decomposing Inequality and Social Welfare Changes: The Use of Alternative Welfare Metrics (2012)
Working Paper: Decomposing Inequality and Social Welfare Changes: The Use of Alternative Welfare Metrics (2011)
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:mlb:wpaper:1121

Access Statistics for this paper

More papers in Department of Economics - Working Papers Series from The University of Melbourne Department of Economics, The University of Melbourne, 4th Floor, FBE Building, Level 4, 111 Barry Street. Victoria, 3010, Australia. Contact information at EDIRC.
Bibliographic data for series maintained by Dandapani Lokanathan ().