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A Social Welfare View Of The Measurement Of Income Equality

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  • D. J. Aigner
  • A. J. Heins

Abstract

Economists' use of the term “equality” in reference to a distribution of incomes has historically been in the sense of a consensus for some statistical characteristic(s) of the distribution rather than a firm concept of equality. Of course such a concept rests on appropriate welfare assumptions about income and its distribution, assumptions which, for the most part, have been left implicit (and unknown) in discussions of income equality in the literature. Our purpose in this paper is dual: first, we wish to discover an unambiguous, welfare‐related equality measure. This we accomplish through suitable assumptions on a social welfare function. What is produced is an “index” of equality which describes the performance of a given distribution relative to the maximum welfare derivable from the total income it represents. The measure thus depends functionally on the welfare attributes of income, something which in reality we know little about. This impasse leads us to inquire into the sensitivity of the index over specifications of the welfare function, which is done by comparing equality ranks for the states of the United States for 1960 under various functional forms and among curves within a given form. As an interesting secondary issue, the performance of traditional equality measures is tested relative to the welfare‐oriented index to discover implications about their welfare content. It is found that the equality index is, in certain ranges for the welfare function, insensitive to its specification. The findings lead directly to conclusions concerning traditional equality measures, their usefulness in correctly accounting for equality differences among alternative income distributions and, concomitantly, their implicit welfare inputs.

Suggested Citation

  • D. J. Aigner & A. J. Heins, 1967. "A Social Welfare View Of The Measurement Of Income Equality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 13(1), pages 12-25, March.
  • Handle: RePEc:bla:revinw:v:13:y:1967:i:1:p:12-25
    DOI: 10.1111/j.1475-4991.1967.tb00732.x
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    Cited by:

    1. Berk, Metin, 1971. "Changing structure of Iowa farmland ownership," ISU General Staff Papers 197101010800005938, Iowa State University, Department of Economics.
    2. Creedy, John, 2021. "Comparing Income Distributions Using Atkinson’s Measure of Inequality," Working Paper Series 9469, Victoria University of Wellington, Chair in Public Finance.
    3. Majumder, Amita & Ray, Ranjan & Santra, Sattwik, 2021. "Should commodity tax rates be uniform across regions in a heterogeneous country? Evidence from India," Journal of Policy Modeling, Elsevier, vol. 43(6), pages 1310-1331.
    4. Adelman I. & Whittle P., 1979. "Static and dynamic indices of income inequality. Provisional draft," ILO Working Papers 991845003402676, International Labour Organization.
    5. John Creedy, 2023. "Comparing Income Distributions Using Atkinson's Measure of Inequality," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 56(1), pages 141-155, March.

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