On the measurement of plutonomy
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Recently, a lot of attention is given to income variations occurring at the top of the income distribution. “What happens to the top 1 %?” is a question of crucial importance on the political level (Occupy Wall Street Movement) as well as on income inequality measurement level. Despite this increased interest, there is no rigorous measurement framework available in the literature for the measurement of plutonomy or “what happens to the top 1 %”. To fill this gap, this paper proposes a simple framework for the measurement of plutonomy. It exposes the ethical principles underlying plutonomy indices and develops restricted Lorenz dominance conditions that produce robust orderings of plutonomy between income distributions. Finally, the paper offers a brief empirical illustration using the World Top Incomes Database.
KeywordsIncome Distribution Lorenz Curve Poverty Measurement Measurement Framework Empirical Illustration
We thank Marc Fleurbaey and two anonymous referees for their useful comments. We also thank Jonno Haisken-DeNew, Paul Frijters, Simon Grant, Jeffrey Kline, Linda Marchese, Kevin Moran and John Quiggin for useful discussions.
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