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Well-Being Inequality and Preference Heterogeneity

37 Pages Posted: 15 Jun 2016  

Koen Decancq

University of Antwerp; KU Leuven - Center for Economic Studies; Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE); University of Mannheim - Mannheim Centre for European Social Research (MZES)

Marc Fleurbaey

Princeton University - Woodrow Wilson School of Public and International Affairs

Erik Schokkaert

Catholic University of Leuven (KUL)

Date Written: June 8, 2016

Abstract

Standard measures of multidimensional inequality (implicitly) assume common preferences for all individuals and, hence, are not sensitive to preference heterogeneity among the members of society. In this paper, we measure the inequality of the distribution of equivalent incomes, which is a preference-sensitive multidimensional well-being measure. To quantify the contribution of preference heterogeneity to well-being inequality, we use a decomposition method that calculates well-being inequality in different counterfactual distributions. We focus on four sources of well-being inequality: the correlation between outcomes and preferences, the preference heterogeneity, the correlation between the outcome dimensions, and the inequality within each of the outcome dimensions. We find that preference heterogeneity accounts for a considerable part of overall well-being inequality in Russia for the period of 1995 to 2005.

Keywords: Well-being Inequality, Equivalent Incomes, Preference Heterogeneity

JEL Classification: D60, D71, I31

Suggested Citation

Decancq, Koen and Fleurbaey, Marc and Schokkaert, Erik, Well-Being Inequality and Preference Heterogeneity (June 8, 2016). Available at SSRN: https://ssrn.com/abstract=2795463

Koen Decancq (Contact Author)

University of Antwerp ( email )

Prinsstraat 13
Antwerp, 2000
Belgium

KU Leuven - Center for Economic Studies ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium

University of Mannheim - Mannheim Centre for European Social Research (MZES) ( email )

D-68131 Mannheim
Germany

Marc Fleurbaey

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

Erik Schokkaert

Catholic University of Leuven (KUL) ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

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