Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/250422 
Year of Publication: 
2021
Series/Report no.: 
IZA Discussion Papers No. 14761
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
The Gini coefficient features prominently in Amartya Sen's 1973 and 1997 seminal work on income inequality and social welfare. We construct the Gini coefficient from socialpsychological building blocks, reformulating it as a ratio between a measure of social stress and aggregate income. We determine when as a consequence of an income gain by an individual, an increase in the social stress measure dominates a concurrent increase in the aggregate income, such that the magnitude of the Gini coefficient increases. By integrating our approach to the construction of the Gini coefficient with Sen's social welfare function, we are able to endow the function with a social-psychological underpinning, showing that this function, too, is a composite of a measure of social stress and aggregate income. We reveal a dual role played by aggregate income as a booster of social welfare in Sen's social welfare function. Quite surprisingly, we find that a marginal increase of income for any individual, regardless of the position of the individual in the hierarchy of incomes, improves welfare as measured by Sen's social welfare function.
Subjects: 
measuring inequality
a social-psychological approach to the construction of the Gini coefficient
properties of the reconstructed Gini coefficient
Sen's social welfare function
Sen's social welfare function as a composite of a measure of social stress and aggregate income
JEL: 
C43
D01
D31
D63
I31
P46
Document Type: 
Working Paper

Files in This Item:
File
Size
330.74 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.