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Different Concepts of Welfare: Indices and complete orderings

Different Concepts of Welfare: Indices and complete orderings. Inequality, Poverty, Polarization measurement. Inequality. At the heart of the Pigou-Dalton Principle, its very essence is interpersonal comparison, if you’ve got more than me we’re unequal. How to measure it?

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Different Concepts of Welfare: Indices and complete orderings

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  1. Different Concepts of Welfare: Indices and complete orderings Inequality, Poverty, Polarization measurement

  2. Inequality • At the heart of the Pigou-Dalton Principle, its very essence is interpersonal comparison, if you’ve got more than me we’re unequal. • How to measure it? • Relative or absolute? • What particular features (groups).

  3. Measures of Inequality: Relative Range, Relative Mean Deviation and Variance.

  4. Coef of Var C, Log St. Dev. L, Gini G, Theil’s Entropy T, Shutz Coef S

  5. Poverty Measurement: The Axioms

  6. Further Poverty Measure Axioms

  7. Absolute Poverty Measures

  8. More Absolute Poverty Measures

  9. Relative Poverty Measures • Rather than think about an absolute poverty cut-off “z” we may substitute some other measure which is “relative” to the population of interest (e.g. some function of median income in the population). • Can insert this formulation of the cut-off in all of the preceding formulae. • Presents difficulties with inter-temporal comparisons. • Presents difficulties with inferences.

  10. A Digression: The LICO and other sample dependent measures • Canadian Council on Social Development (1992) claimed that 1.1 million children were living below the poverty line. • LICO “Low Income Cut Off” = income level below which a household unit will spend on average at least 56.2% on food, shelter and clothing. • Cut off changes over time with tastes, prices etc. • Problem if the income elasticity around the poverty cut off is greater than one.

  11. Overall Income Elasticities

  12. Income Elasticities by Income Quantile

  13. Polarization

  14. Polarization Measurement: The Axioms

  15. Polarization: The Measures

  16. Other Polarization and Alienation Measures. • Focusing on just two groups or clubs Alienation measures such as the Gini based pooled mean normalized difference in subgroup means, and the distributional overlap measure are candidates for distributional overlap (Anderson (2006)). • Recently a new measure, the Bipolar Trapezoid, particularly useful in multi-dimensional environments has been developed (Anderson (2008).

  17. AGINI

  18. An Overlap Measure.

  19. The Trapezoidal Measure

  20. The Trapezoid measure (details)

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