The measurement of welfare change

We propose a class of measures of welfare change that are based on the generalized Gini social welfare functions. We analyze these measures in the context of a second-order dominance property that is akin to generalized Lorenz dominance as introduced by Shorrocks (Economica 50:3-17, 1983) and Kakwan...

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Bibliographic Details
Published in:Social choice and welfare 2019-12, Vol.53 (4), p.603-619
Main Authors: Bossert, Walter, Dutta, Bhaskar
Format: Article
Language:English
Subjects:
Changes
Classification
Dominance
Econometrics
Economic models
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Game Theory
International Political Economy
Measurement
Original Paper
Property
Public Finance
Social and Behav. Sciences
Social classes
Social Policy
Social welfare
Welfare economics
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Summary:We propose a class of measures of welfare change that are based on the generalized Gini social welfare functions. We analyze these measures in the context of a second-order dominance property that is akin to generalized Lorenz dominance as introduced by Shorrocks (Economica 50:3-17, 1983) and Kakwani (Advances in econometrics, vol 3. JAI Press, Greenwich, pp 191-213, 1984). Because we consider welfare differences rather than welfare levels, the requisite equivalence result involves affine welfare functions only, as opposed to the entire class of strictly increasing and strictly S-concave welfare indicators. Thus, our measures are associated with those members of the generalized-Gini class that are strictly increasing and strictly S-concave. Moving from second-order dominance to first-order dominance does not change this result significantly: for most intents and purposes, the generalized Ginis remain the only strictly increasing and strictly S-concave measures that are equivalent to this first-order dominance condition phrased in terms of welfare change. Our final result provides a characterization of our measures of welfare change in the spirit of Weymark's (Math Soc Sci 1:409-430, 1981 ) original axiomatization of the generalized Gini welfare functions. Journal of Economic Literature Classification No.: D31.
ISSN:0176-1714
1432-217X
DOI:10.1007/s00355-019-01201-w