The paper aims to identify structural differences among European countries concerning inequality of living conditions and opportunities, and quantified by well-being indicators, so to: 1) compare living standards across countries and 2) find out whether a trend may be singled out

Croci Angelini, Elisabetta

Michelangeli, Alessandra

DSpace a Parma

XVI AISSEC – Parma, 21-23 Giugno 2007
Measuring Economic Well-B eing in a 
Mult id imensional P ersp ect iv e
E. Croci Angelini croci@unimc.it
A. Michelangeli
alessandra.michelangeli@unimib.it
23/04/2008 CrociAngelini - Michelangeli 2
Aims of the paper
• Contribute within the research project 
INEQ covering many aspects of inequality: 
mechanisms, effects and policies
• Identify structural differences among
European countries
– concerning inequality of living conditions and 
opportunities
– quantified by well-being indicators, so to
• compare living standards across countries and 
• find out whether a trend may be singled out
23/04/2008 CrociAngelini - Michelangeli 3
Map of the paper
• Concepts
– Welfare and well-being
– Well-being and poverty
– Poverty and social 
exclusion
• Measures
– Macro- and micro-dates
– Uni- and multi-dimensional 
indexes
– Subjective and objective 
point of view/approach
• Methods
– Assiomatic dominance
criteria for ranking 
multivariate distributions
– Inequality indexes
• Application and results
– Four EU countries 
assessed (F,I,DK,)
– over four attributes
• Univariate distributions
• Multivariate distributions
23/04/2008 CrociAngelini - Michelangeli 4
Welfare & well-being
• Welfare economics:
• a social welfare 
function is defined
• income is implicitly 
seen as a proxy of 
welfare
• utilitarian approach
• a number of problems:
– Interpersonal 
comparisons of utility
– Value judgements
• Well-being
• a social evaluation 
function is defined to 
rank distributions
• it is intrinsically multi-
dimensional
• non utilitarian 
• it seeks a measure for 
“a good life”
23/04/2008 CrociAngelini - Michelangeli 5
Well-being & poverty
• A poverty line defines 
the set of the poor as 
distinct from the set of 
the non-poor
• Useful when the two 
homogeneous “types” 
fully correspond to the 
two dichotomous sets
• It implies a bimodal 
distribution
• A continuous variable 
showing an unimodal
distribution does not 
allow a clear and non-
arbitrary separation in 
two sets
• well-being & poverty
represent opposite 
sides of the same 
gradual dimension
23/04/2008 CrociAngelini - Michelangeli 6
Poverty & social exclusion
• Poverty is deprivation
of some essential
items e.g. income
• In multidimesional
environment how
deprivation over 
different dimensions
should be combined?
– Substitution?
– Complements? 
• Social exclusion is
concerned with
individuals having
– impaired access to
opportunities, 
– inability to develop full 
potential, 
– impossibility to take 
part into society, 
– and therefore deprived
23/04/2008 CrociAngelini - Michelangeli 7
Measures
• Unidimensional
 one monetary
variable:
– Income disposable
income & taxes
– Expenditure 
savings & investment
• Everything may be
bought and sold 
prevalence of the 
market domain
• Multidimensional
 many interwoven
factors:
– Monetary command
over resources
– Health  nutrition, 
safety, longevity
– Education  literacy, 
attainment, schooling
– Housing shelter
• Functionings & 
capabilities
23/04/2008 CrociAngelini - Michelangeli 8
Measures based on
• macrodata
• Unidimensional
e.g. GDPpc
• Multidimensional 
HDI on 3 dimensions:
– 1/3 Life expectancy at 
birth
– 1/3 Education  2/3 
adult literacy + 1/3 
gross enrolment
– 1/3 GDPpc PPP US$
• microdata
• Unidimensional
e.g. Gini
• Multidimensional
– Personal
• Education
• Health
– Household
• Income
• Housing
– …
23/04/2008 CrociAngelini - Michelangeli 9
subjective & objective measures
• Subjective measures: 
everyone is the best 
judge of her/himself:
– Satisfaction evaluation
– Self assessment of 
personal conditions on 
various issues
– How do you feel? 
Well-being&happiness
Own value judgements 
paternalism excluded
• Objective measures:
– Nutritional requirements
based on expert advice
– Basic needs defined on 
a basket of goods
– Measurable dimensions:
• disposable income
• educational attainment
• access to “relevant” 
goods and services
Normative in choosing 
relevant issues, items, 
dimensions
23/04/2008 CrociAngelini - Michelangeli 10
Methods
• Assiomatic
– Dominance criteria
provide partial
orderings based on 
social preference
– Mainly, homogeneous 
populations as to the 
characteristics which 
are not relevant from
well-being point of 
view (age, sex, …)
• Inequality indexes
– order all distributions
– homogeneous 
populations not needed
– Problems as to:
• Dimensions identification
 what is relavant
• Choice of attributes
how measurable it is
• Aggregation rules 
cardinality, weights, 
categorial variables …
23/04/2008 CrociAngelini - Michelangeli 11
Inequality indexes
• Fuzzy sets
– Zadeh, 1965
– Dubois & Prade, 1980
– Cerioli & Zani, 1990
– Cheli & Lemmi, 1995
– Chiappero Martinetti, 
2000, 2006
• Assiomatically built
– Kolm, 1977
– Atkinson & 
Bourguignon, 1982
– Maasoumi, 1986, 1999
– Tsui, 1995, 1999
– Mueller & Trannoy, 
2003
– Weymark, 2006
They all share difficulties over 
concept definitions and aggregation rules
23/04/2008 CrociAngelini - Michelangeli 12
difficulties
• Ranking individuals over heterogeneous
dimensions such as:
– Income ranks command over resources
– Education per se + ability of enjoyment
– Health  per se + ability of self support
• Value judgements on inequality due to:
– Effort legitimate inequality
– Circumstances social background
– Luck  beyond individual control


Measuring Economic Well-Being in a Multidimensional Perspective

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