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A social-psychological reconstruction of Amartya Sen's measures of inequality and social welfare

Author

Listed:
  • Stark, Oded
  • Budzinski, Wiktor
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 social-psychological 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.

Suggested Citation

  • Stark, Oded & Budzinski, Wiktor, 2021. "A social-psychological reconstruction of Amartya Sen's measures of inequality and social welfare," University of Tübingen Working Papers in Business and Economics 151, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
    • Handle: RePEc:zbw:tuewef:151
    DOI: 10.15496/publikation-60478
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    References listed on IDEAS

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    Cited by:

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    2. Stark, Oded & Kosiorowski, Grzegorz, 2024. "An optimal allocation of asylum seekers," Journal of Economic Behavior & Organization, Elsevier, vol. 220(C), pages 1-11.

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    More about this item

    Keywords

    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;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • P46 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty

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