Blackwell Reference Online

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The modern theory of income distribution and welfare has experienced radical progress toward a more objective and systematic analysis of welfare and inequality. Value judgements that are implicit in any particular index of inequality or poverty have been made explicit and are better understood. We have a better understanding of the limitations of basing welfare statements on measured income, as well as the challenges of developing more meaningful measures of welfare by means of, for example, equivalence scales, cost of living indices, or multidimensional indices. On the empirical side, the appropriate statistical tools for drawing inferences about indices and their distributions have been developed. Estimation of inequality indices, their variances, and tests of hypotheses regarding distributional changes or dominance relations, can be conducted according to state-of-the-art and practical statistical tools. Computer code, even for PCs, is no longer a “problem.” One does not have to subscribe to either the existence or the pre-eminence of social welfare functions (SWFs) in order to appreciate their positive role in providing economy of thought and discipline in this area. For this reason, I have generally focused on theoretical developments that are based on the SWF approach. Some associated theoretical concepts for ranking distributions are presented in section 2. On the other hand, ... log in or subscribe to read full text