Distribution-Free Statistical Inferences for Testing Marginal Changes in Inequality Indices

This paper develops asymptotically distribution-free inference for testing inequality indices with dependent samples. It considers the interpolated Gini coefficient and the generalized entropy class, which includes several commonly used inequality indices. We first establish inference tests for changes in inequality indices with completely dependent samples (i.e., matched pairs) and then generalize the inference procedures to cases with partially dependent samples. The effects of sample dependency on standard errors of inequality changes are examined through simulation studies as well as through applications to the CPS and PSID data

Empirical Issues in Lifetime Poverty Measurement

This paper demonstrates the implications of adopting an approach to measuring poverty that takes into account the lifetime experience of individuals rather than simply taking a static or cross-sectional perspective. Our approach follows the theoretical innovations in Hoy and Zheng (2008) which address various aspects of the specific pattern of any poverty spells experienced by an individual as well as a possible retrospective consideration that an individual might have concerning his life experience as a whole. For an individual, our perspective of lifetime poverty is influenced by both the snapshot poverty of each period and the poverty level of the permanent lifetime consumption; it is also influenced by how poverty spells are distributed over the lifetime. Using PSID data for the US, we demonstrate empirically the power of alternative axioms concerning how lifetime poverty should be measured when making pairwise comparisons of individual lifetime profiles of consumption (income) experiences. We also demonstrate the importance of taking a lifetime view of poverty in comparing poverty between groups by use of the classic FGT ‘snapshot’ poverty index in conjunction with period weighting functions that explicitly reflect concerns about the pattern of poverty spells over individuals’ lifetimes.Lifetime poverty, snapshot poverty, chronic poverty, early poverty, poverty measurement

Decomposing the Intergenerational Disparity in Income and Obesity

Intergenerational disparity in income and health violates the norm of equal opportunity and deserves the attention of researchers and policy makers. To understand changes in intergenerational disparity, we created the intergenerational mobility index (IMI), which can simultaneously measure changes in income rankings and in health outcomes across two generations. We selected obesity as one health outcome to illustrate the application of IMI due to its severe health and financial consequences for society and the significant changes in the distribution of obesity across income groups. Although obesity has increased in all income groups in the last four decades, higher income groups have tended to have a faster increase in obesity, which has reduced the disparity in obesity across income groups. The strength of our intergenerational approach within families is to control the genetic influence, which is one of the strongest determinants of obesity. The decomposition of the IMI illustrates that it captures changes in obesity distribution (holding constant income rankings between generations) and changes in income rankings (holding constant the obesity distribution across generations), simultaneously. We used the data of the Panel Study of Income Dynamics (PSID), which have been collected since 1967, is the longest longitudinal survey in the U.S. The PSID surveyed respondents’ height and weight were recorded in 1986 and from 1999 to 2007. We selected respondents from 1986 as the parental generation and respondents from 2007 as the adult children’s generation. To make the adult children’s body weight status and income comparable to their parents’, we stratified the analysis by gender. For the pairs of fathers and adult sons, we found the intergenerational disparity in overweight, a less severe indicator of excessive fatness, across income was decreasing. This was partially due to the up-swing in the adult children’s income status. For the pairs of mothers and adult daughters, we found a similar decrease in socioeconomic disparity in obesity. However, decomposition of the IMI indicated that changes in income distributions between mothers and adult daughters contributed smaller effects than that between fathers and adult sons. Our study has demonstrated that the IMI and its decomposition are useful tools for analyzing intergenerational disparity in income and health

On the power of poverty orderings

This paper investigates the possibility of increasing the ordering power of additively separable poverty measures beyond the condition of second degree stochastic dominance by considering third degree stochastic dominance. For a fixed poverty line, the ordering power can be significantly enhanced by using the third degree criterion. For a range of poverty lines, the marginal power of the third degree criterion over the second degree depends critically upon the lower bound of the range; if the lower bound poverty line is arbitrarily close to zero, the two criteria coincide. The implications of a strong version of the transfer sensitivity axiom are also considered.

Unit-Consistent Decomposable Inequality Measures

This paper introduces a new axiom-the unit consistency axiom-into inequality measurement. This new axiom requires the ordinal inequality rankings (rather than the cardinal indices) to be unaffected when incomes are expressed in different units. I argue that unit consistency is an indispensable axiom for the measurement of income inequality. When unit consistency is combined with decomposability, I show that the unit-consistent decomposable class of inequality measures is a two-parameter extension of the one-parameter generalized entropy class. The extended class accommodates a variety of value judgments and includes different types of inequality measures. Copyright (c) The London School of Economics and Political Science 2006.