Social Welfare Analysis of Income Distributions: Ranking Income Distributions with Lorenz Curves

Lorenzo Bellù and Paolo Liberati

MPRA Paper from University Library of Munich, Germany

Abstract: This paper illustrates how Lorenz Curves can be used to identify the best income distribution on social welfare grounds, within a set of alternative income distributions generated by different policy options. After highlighting some drawbacks of using specific functional forms of the Social Welfare Function (SWF) to infer welfare judgments, the rationale for using Lorenz Curves to rank income distributions is provided in a step-by-step procedure and is illustrated with some simple numerical examples. This module also points out the limitations of Lorenz dominance and highlights how, in some circumstances, it is necessary to use Generalised Lorenz (GL) Curves.

Keywords: lorenz curve; social welfare function; generalised lorenz curves; income distributions; inequality; poverty; lorenz dominance; atkinsons theorem (search for similar items in EconPapers)
JEL-codes: A13 C02 D30 D31 D61 D63 E64 H22 H23 H53 I30 I31 I32 I38 J4 J5 (search for similar items in EconPapers)
Date: 2005-11-01
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Citations: View citations in EconPapers (1)

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