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Efficiency, Equity, and Generalized Lorenz Dominance

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  • Christian Kleiber
  • Walter Kraemer

Abstract

We decompose the generalized Lorenz order into a size and a distribution component. The former is represented by stochastic dominance, the latter by the standard Lorenz order. We show that it is always possible, given generalized Lorenz dominance between two distributions F and G, to find distributions H1 and H2 such that F stochastically dominates H1 and H1 Lorenz-dominates G, and such that F Lorenz-dominates H2 and H2 stochastically dominates G. We also show that generalized Lorenz dominance is characterized by this property and discuss the implications of these results for choice under risk.

Suggested Citation

  • Christian Kleiber & Walter Kraemer, 2000. "Efficiency, Equity, and Generalized Lorenz Dominance," CESifo Working Paper Series 343, CESifo.
    • Handle: RePEc:ces:ceswps:_343
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    References listed on IDEAS

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    Cited by:

    1. Kleiber, Christian, 2005. "The Lorenz curve in economics and econometrics," Technical Reports 2005,30, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen.
    2. Ronald Fischer & Diego Huerta, 2015. "Economic Performance, Wealth Distribution and Credit Restrictions Under Variable Investment: The Open Economy," Working Papers Central Bank of Chile 765, Central Bank of Chile.
    3. Krämer, Walter & Neumärker, Simon, 2019. "Skill Scores and modified Lorenz domination in default forecasts," Economics Letters, Elsevier, vol. 181(C), pages 61-64.

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