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The effect on inequality of changing one or two incomes

Author

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  • Peter Lambert
  • Giuseppe Lanza
Abstract
We examine the effect on inequality of increasing one income, and show that for two wide classes of indices a benchmark income level or position exists, dividing upper from lower incomes, such that if a lower income is raised, inequality falls, and if an upper income is raised, inequality rises. We provide a condition on the inequality orderings implicit in two inequality indices under which the one has a lower benchmark than the other for all unequal income distributions. We go on to examine the effect on the same indices of simultaneously increasing one income and decreasing another higher up the distribution, deriving results which quantify the extent of the ‘bucket leak’ which can be tolerated without negating the beneficial inequality effect of the transfer. Our results have implications for the inequality and poverty impacts of different income growth patterns, and of redistributive programmes, leaky or not, which are briefly discussed. Copyright Springer Science+Business Media, Inc. 2006

Suggested Citation

  • Peter Lambert & Giuseppe Lanza, 2006. "The effect on inequality of changing one or two incomes," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 4(3), pages 253-277, December.
    • Handle: RePEc:kap:jecinq:v:4:y:2006:i:3:p:253-277
    DOI: 10.1007/s10888-006-9020-1
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    Cited by:

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    2. Guido Erreygers & Philip Clarke & Qiong Zheng, 2017. "On the measurement of socioeconomic inequality of health between countries," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 15(2), pages 175-193, June.
    3. Peter J. Lambert, 2014. "The Impact of a Marginal Subsidy on Gini Indices: Comment," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(3), pages 604-605, September.
    4. Eva Camacho-Cuena & Tibor Neugebauer & Christian Seidl, 2007. "Leaky Buckets Versus Compensating Justice: An Experimental Investigation," Working Papers 74, ECINEQ, Society for the Study of Economic Inequality.
    5. Frank A Cowell & Emmanuel Flachaire, 2018. "Inequality Measurement and the Rich: Why inequality increased more than we thought," STICERD - Public Economics Programme Discussion Papers 36, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    6. Bosmans, Kristof, 2014. "Distribution-sensitivity of rank-dependent poverty measures," Journal of Mathematical Economics, Elsevier, vol. 51(C), pages 69-76.
    7. Laurence S J Roope, 2021. "First estimates of inequality benchmark incomes for a range of countries," PLOS ONE, Public Library of Science, vol. 16(3), pages 1-8, March.
    8. Forster, Martin & La Torre, Davide & Lambert, Peter J., 2014. "Optimal control of inequality under uncertainty," Mathematical Social Sciences, Elsevier, vol. 68(C), pages 53-59.
    9. Guido Erreygers & Roselinde Kessels, 2017. "Socioeconomic Status and Health: A New Approach to the Measurement of Bivariate Inequality," IJERPH, MDPI, vol. 14(7), pages 1-23, June.
    10. Stanislaw Maciej Kot & Piotr Paradowski, 2024. "The Equally Distributed Equivalent Income as the Upper Limit of Poverty Lines," LIS Working papers 885, LIS Cross-National Data Center in Luxembourg.
    11. Francesco Pastore, 2009. "School-to-Work Transitions in Mongolia," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 6(2), pages 245-264, December.
    12. Francisco J. Goerlich-Gisbert & Casilda Lasso de la Vega & Ana Marta Urrutia, 2009. "The ‘extended’ Atkinson family and changes in the expenditure distribution. Spain 1973/74-2003," Journal of Income Distribution, Ad libros publications inc., vol. 18(1), pages 20-41, March.
    13. Laurence S. J. Roope, 2019. "Characterizing inequality benchmark incomes," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(1), pages 131-145, May.
    14. John Creedy, 2016. "Interpreting inequality measures and changes in inequality," New Zealand Economic Papers, Taylor & Francis Journals, vol. 50(2), pages 177-192, August.
    15. Guido Erreygers & Roselinde Kessels & Linkun Chen & Philip Clarke, 2016. "Decomposing Socioeconomic Inequality of Health," EcoMod2016 9574, EcoMod.
    16. de la Vega, Casilda Lasso & Seidl, Christian, 2007. "The Impossibility of a Just Pigouvian," Economics Working Papers 2007-10, Christian-Albrechts-University of Kiel, Department of Economics.
    17. Diego C. Botassio & Rodolfo Hoffmann, 2020. "Measuring gender segregation," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(1), pages 25-47, April.
    18. Carmen Puerta & Ana Urrutia, 2012. "Lower and upper tail concern and the rank dependent social evaluation functions," Economics Bulletin, AccessEcon, vol. 32(4), pages 3250-3259.
    19. John Creedy, 2023. "Comparing Income Distributions Using Atkinson's Measure of Inequality," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 56(1), pages 141-155, March.

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