Abstract:
This paper assumes two kinds of social planners who evaluate income distributions concerning social welfare, economic inequality and poverty. The first kind of social planner, SPε , comprises averters to income inequality as measured by the normative parameter ε. The second kind of social planner, SPv , comprises averters to rank inequality as measured by the normative parameter v. As every member of society may play the role of a social planner, there could be as many levels of ε and v as society members. It raises the question of which ranges of v and ε values are ethically sensible when conducting empirical welfare studies. This paper proposes an answer to this question, introducing the concept of inequality-entangled SPv and SPε. If a randomly selected SPv had vi , one could automatically find εi of the inequality-entangled SPε , and vice versa. The inequality-entangled SPv and SPε evaluate inequality, social welfare and poverty consistently. This paper offers a method of eliciting the pairs (vi , εi ), i=1, 2, …,n from empirical income distributions. Moreover, a single pair (v*, ε*) exists, representing all n pairs. This paper applies the inequalityentanglement methodological framework to assess social welfare, inequality and poverty for 27 European Union member countries in 2021.