23.04.2008 – Comparing Inequality across Distributions with Different Total Income: A Characterization of Inequality Equivalence Criteria

April 23, 2008

23 March 2008Lille
Share this:Tweet about this on TwitterShare on FacebookShare on LinkedInShare on Google+

Claudio Zoli –
Department of Economics,
University of Verona (Italy)

Date and place: 23/04/2008 at 14:00
IÉSEG School of Management – 7 rue Solférino – 59000 LILLE
Lecture Room: E11

IÉSEG Seminar
jointly with LEM UMR8179

Paper and slides: Download the paper (PDF – 532898 Ko)

Description: We introduce an axiomatic framework to analyze the perception of inequality across distributions with different total income. The main result is the characterization of a new two parameters generalized version of the inequality equivalence criterion (IEC), the Flexible IEC (FIE). This criterion is able to encompass all the most used criteria of inequality equivalence and is sufficiently flexible to provide a perception consistent with evidence from questionnaire investigations, namely that the inequality perception goes from the relative view (focussing on income shares) to the absolute view (focussing on absolute income differentials) as incomes increase. One parameter of the FIE is associated with the Bossert and Pfingsten (Math. Soc. Sc. 1990) Intermediate IEC (IIE) while the other is shown to lead to an alternative single parameter version of the IEC, the Proportional IEC which is dual to the previous. We provide independent characterizations both of PIE and IIE. Also alternative IECs existing in the literature are characterized within the axiomatic framework suggested. These results are consistent with those obtained in the surplus sharing literature and recently in the inequality measurement literature. Moreover they can provide insights on risk comparisons of lotteries with different expected value.