This article establishes an equivalence between four incomplete rankings of distributions of income among agents who are vertically differentiated with respect to some nonincome characteristic (health, household size, etc.). The first ranking is the possibility of going from one distribution to the other by a finite sequence of income transfers from richer and more highly ranked agents to poorer and less highly ranked ones. The second ranking is the unanimity among utilitarian planners who assume that agents' marginal utility of income is decreasing with respect to both income and the source of vertical differentiation. The third ranking is the Bourguignon (Journal of Econometrics, 42 (1989), 67-80) Ordered Poverty Gap dominance criterion. The fourth ranking is a new dominance criterion based on cumulative lowest incomes.
We establish an equivalence between three criteria for comparing distributions of an ordinal variable taking finitely many values. The first criterion is the possibility of going from one distribution to the other by a finite sequence of increments and/or Hammond transfers. The latter transfers are like the Pigou–Dalton ones, but without the requirement that the amount transferred be fixed. The second criterion is the unanimity of all comparisons of the distributions performed by a class of additively separable social evaluation functions. The third criterion is a new statistical test based on a weighted recursion of the cumulative distribution. We also identify an exact test for the possibility of going from one distribution to another by a finite sequence of Hammond transfers only. An illustration of the usefulness of our approach for evaluating distributions of self-reported happiness level is also provided.
This paper examines how voluntary contributions to a public good are affected by the contributors' heterogeneity in beliefs about the uncertain impact of their contributions. It assumes that contributors have Savagian preferences that are represented by a two-state-dependent expected utility function and different beliefs about the benefit that will result from the sum of their contributions. We establish general comparative statics results regarding the effect of specific changes in the distribution of beliefs on the (unique) Nash equilibrium provision of the public good, under certain conditions imposed on the preferences. We specifically show that the equilibrium public good provision is increasing with respect to both first- and second-order stochastic dominance changes in the distribution of beliefs. Hence, increasing the contributors' optimism about the uncertain benefit of their contributions increases aggregate public good provision, as does any homogenization of these beliefs around their mean.
What would be the analogue of the Lorenz quasi-ordering when the variable of interest is continuous and of a purely ordinal nature? We argue that it is possible to derive such a criterion by substituting for the Pigou-Dalton transfer used in the standard inequality literature what we refer to as a Hammond progressive transfer. According to this criterion, one distribution of utilities is considered to be less unequal than another if it is judged better by both the lexicographic extensions of the maximin and the minimax, henceforth referred to as the leximin and the antileximax, respectively. If one imposes in addition that an increase in someone’s utility makes the society better off, then one is left with the leximin, while the requirement that society welfare increases as the result of a decrease of one person’s utility gives the antileximax criterion. Incidentally, the paper provides an alternative and simple characterisation of the leximin principle widely used in the social choice and welfare literature.
We examine the problem of providing a non-rival and excludable public good to individuals with the same preferences and differing contributing capacities. Exclusion from the public good is costly in the sense that if two different quantities of the public good are consumed in the community, then the sum of the costs of providing the two quantities must be borne. By contrast, costless exclusion only requires the cost of the largest quantity consumed of the public good to be financed. We show that despite its important cost, providing public goods in different quantities is often part of any optimal provision of public good when the public authority is imperfectly informed about the agents' contributive capacities. In the specific situation where individuals have an additively separable logarithmic utility function, we provide a complete characterization of the optimal exclusion structure in the two-type case. We also show that the preference for such a costly exclusion is more likely when the heterogeneity in the population or income is large, and when the aversion to utility inequality is important.
We provide an axiomatic characterization of a family of criteria for ranking completely uncertain and/or ambiguous decisions. A completely uncertain decision is described by the set of all its consequences (assumed to be finite). An ambiguous decision is described as a set of possible probability distributions over a set of prizes. Every criterion in the family compares sets on the basis of their conditional expected utility , for some “likelihood” function taking strictly positive values and some utility function both having the universe of alternatives as their domain.
In this paper, we theoretically characterize robust empirically implementable normative criteria for evaluating socially risky situations. Socially risky situations are modeled as distributions, among individuals, of lotteries on a finite set of state-contingent pecuniary consequences. Individuals are assumed to have selfish Von Neumann–Morgenstern preferences for these socially risky situations. We provide empirically implementable criteria that coincide with the unanimity, over a reasonably large class of such individual preferences, of anonymous and Pareto-inclusive Von Neuman Morgenstern social rankings of risks. The implementable criteria can be interpreted as sequential expected poverty dominance. An illustration of the usefulness of the criteria for comparing the exposure to unemployment risk of different segments of the French and US workforce is also provided. Copyright Springer-Verlag Berlin Heidelberg 2015
This paper examines the segregative properties of endogenous processes of jurisdiction formation in the presence of a competitive land market. In the considered model, a continuum of households with different income levels and the same preference for local public goods, private spending and housing choose a location from a finite set. Each location has an initial endowment of housing that is priced competitively and that belongs to absentee landlords. Each location is also endowed with a specific technology for producing public goods. Households' preferences are assumed to be homothetically separable between local public goods on the one hand and private spending and housing on the other. Public goods provision is financed by a given, but unspecified, mixture of (linear) wealth and housing taxes. It is shown that stable jurisdiction structures are segregated by income only if households have a Marshallian demand for any public good (conditionally on the quantities of the other public goods) that is a monotonic function of the price of private spending. It is also shown that if there is only one public good, or if household preferences are additively separable between public and private goods, then the condition is also sufficient for segregation. Examples showing the sensitivity of the results to the assumptions of homothetic separability and additive separability are also provided.
We show that it is possible to reconcile the utilitarian and welfarist principles under the requirement of unanimity provided that the set of profiles over which the consensus is attained is rich enough. More precisely, we identify a closedness condition which, if satisfied by a class of n-tuples of utility functions, guarantees that the rankings of social states induced by utilitarian and welfarist unanimities over that class are identical. We illustrate the importance of the result for the measurement of unidimensional as well as multidimensional inequalities from a dominance point of view. Copyright Springer-Verlag 2013
This paper proposes two dominance criteria for evaluating education systems described as joint distributions of the pupils’ cognitive skill achievements and family backgrounds. The first criterion is the smallest transitive ranking of education systems compatible with three elementary principles. The first principle requires the favorable recording of any improvement in the cognitive skill of a child with a given family background . The second principle demands that any child’s cognitive skill be all the more favourably appraised as the child is coming from an unfavourable background. The third principle states that when two different skills and family backgrounds are allocated between two children, it is preferable that the high skill be given to the low background child than the other way around. Our second criterion adds to the three principles the elitist requirement that a mean-preserving spread in the skills of two children with the same background be recorded favorably. We apply our criteria to the ranking of education systems of 43 countries, where we measure cognitive skills by PISA score in mathematics and famly background by the largest of the two parents’International Socio Economic Index. Our criteria conclusively compare about 19% of all the possible pairs of countries.