The atlas of inequality aversion: Theory and empirical evidence from the Luxembourg Income Study Database
In the distributive analysis, the constant relative inequality aversion utility function is a standard tool for ethical judgements of income distributions. The sole parameter ε of this function expresses a society's aversion to inequality. However, the profession has not committed to the range of ε. This paper aims to estimate the parameter ε of the constant relative inequality aversion utility function using datasets available from the Luxembourg Income Study Database. We utilise the method of estimating ε assuming incomes obey the generalised beta distribution of the second kind. The estimat... Mehr ...
Verfasser: | |
---|---|
Dokumenttyp: | doc-type:workingPaper |
Erscheinungsdatum: | 2022 |
Verlag/Hrsg.: |
Luxembourg: Luxembourg Income Study (LIS)
|
Schlagwörter: | ddc:330 / C10 / D30 / D60 / I30 / O15 / inequality aversion / Atkinson Index / income distribution / inequality / utility function |
Sprache: | Englisch |
Permalink: | https://search.fid-benelux.de/Record/base-26746274 |
Datenquelle: | BASE; Originalkatalog |
Powered By: | BASE |
Link(s) : | http://hdl.handle.net/10419/267026 |
In the distributive analysis, the constant relative inequality aversion utility function is a standard tool for ethical judgements of income distributions. The sole parameter ε of this function expresses a society's aversion to inequality. However, the profession has not committed to the range of ε. This paper aims to estimate the parameter ε of the constant relative inequality aversion utility function using datasets available from the Luxembourg Income Study Database. We utilise the method of estimating ε assuming incomes obey the generalised beta distribution of the second kind. The estimator of ε is derived from the mathematical condition of the existence of the social welfare function. We elaborate an 'atlas' of 388 estimates of ε for 55 countries across time. We also verify two hypotheses: 1) The richer the country, the greater the societal inequality aversion; 2) The greater (lower) the inequality aversion, the lower (greater) income inequality. Our data do not confirm the 1st hypothesis. For verifying the 2nd hypothesis, we use the inequality-development relationship augmented by inequality aversion. The 2nd hypothesis is unfalsified in about 90% of country-year cases.