Comparisons of Heterogeneous Distributions and Dominance Criteria

Abstract

We are interested in the comparisons of standard-of-living across societies when observations of both income and household structure are available. We generalise the approach of Atkinson and Bourguignon (1987) to the case where the marginal distributions of needs can vary across the household populations under comparison. We assume that a sympathetic observer uses a utilitarian social welfare function in order to rank heterogeneous income distributions. Insofar as any individual can play the role of the observer, we take the unanimity point of view according to which the planner’s judgements have to comply with a certain number of basic normative principles. We impose increasingly restrictive conditions on the household’s utility function and we investigate their effects on the resulting rankings of the distributions. This leads us to propose four dominance criteria that can be used for providing an unambiguous ranking of income distributions for heterogeneous populations.Normative Analysis, Utilitarianism, Welfarism, Multidimensional Inequality and Welfare, Bidimensional Stochastic Dominance, Inequality Reducing Transformations.