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The Central Role of Efficiency in Inequality and Welfare Measurement Theory

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In the literature on inequality measurement and welfare theory the well known trade off between equity and efficiency is examined without taking price information into account. In this paper we show how price information can be incorporated in these two subjects and how an ordinal indicator of real inequality can be generated from an ordinal indicator of welfare and vice versa. Therefore, we use a more general definition of efficiency than the one existing in the literature and introduce “real” efficiency orderings and measures, respectively. Analyzing this ordinal welfare approach it turns out, that these efficiency measures play a determining rule in this procedure.


  • Price Information
  • Inequality Aversion
  • Nominal Income
  • Absolute Inequality
  • Efficiency Ranking

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the author is indebted to Satya Chakravarty and Andreas Pfingsten who provided helpful comments

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© 1993 Springer-Verlag Berlin · Heidelberg

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Weinhardt, C. (1993). The Central Role of Efficiency in Inequality and Welfare Measurement Theory. In: Diewert, W.E., Spremann, K., Stehling, F. (eds) Mathematical Modelling in Economics. Springer, Berlin, Heidelberg.

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  • Publisher Name: Springer, Berlin, Heidelberg

  • Print ISBN: 978-3-642-78510-8

  • Online ISBN: 978-3-642-78508-5

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