What do normative indices of multidimensional inequality really measure ?

Bosmans, Kristof;Decancq, Koen;Ooghe, Erwin
(2015) Journal of Public Economics — Vol. 130, p. 94-104 (2015)

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Authors
  • Bosmans, KristofUniversiteit Maastricht
    Author
  • Decancq, KoenUniversiteit Antwerpen, KU Leuven and CORE, UCL
    Author
  • Ooghe, ErwinKU Leuven
    Author
Abstract
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.
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Bosmans, K., Decancq, K., & Ooghe, E. (2015). What do normative indices of multidimensional inequality really measure ? Journal of Public Economics, 130, 94-104. https://doi.org/10.1016/j.pubeco.2015.03.003 (Original work published 2015)