What do normative indices of multidimensional inequality really measure?What do normative indices of multidimensional inequality really measure?
Faculty of Social Sciences. Sociology
Herman Deleeck Centre for Social Policy
Journal of public economics. - Amsterdam
130(2015), p. 94-104
University of Antwerp
We argue that normative indices of multidimensional inequality do not only measure a distribution's extent of inequity (i.e., the gaps between the better-off and the worse-off), but also its extent of inefficiency (i.e., the non-realized mutually beneficial exchanges of goods). We provide a decomposition that allows us to quantify these two parts of inequality. Strikingly, the inequity component turns out to be a two-stage measure, that is, a measure that applies a unidimensional inequality measure to the vector of individual well-being levels. The decomposition also clarifies existing controversies surrounding two prominent transfer axioms, viz., uniform majorization and correlation increasing majorization. An application to inequality in human development illustrates the analysis.