Intersecting Generalized Lorenz Curves and the Gini Index
University of Bologna - Department of Economics; University of Pavia - Faculty of Economics
Social Choice and Welfare, Vol. 16, Iss. 2, January 28, 1999
As is well known, the use of the Gini coefficient in comparisons is inconsistent with an utilitarian approach. This paper analyzes the Gini coefficient's normative significance in welfare comparisons evaluating income distributions according to Yaari dual social welfare function. When generalized Lorenz curves cross once, the Gini coefficient is decisive in determining welfare rankings if we strengthen the Principle of Transfers applying a Positional version of the Principle of Transfer Sensitivity. This result can also be extended to the case of multiple crossings.
JEL Classification: D71Accepted Paper Series
Date posted: September 16, 1999
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