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A class of distribution and association sensitive multidimensional welfare indices

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Abstract

This paper axiomatically characterizes a class of two-parameter generalized mean social welfare indices having two or more dimensions of well-being. These indices, under appropriate parametric restrictions, are sensitive to two distinct forms of inter-personal inequality. The first form of inequality is concerned with the dispersion of each dimensional achievement across the population. The second is concerned with the association or correlation across dimensions, reflecting the observation that the correlation of individual components of well-being across dimensions is relevant for social welfare evaluation. It is shown that many existing multidimensional welfare indices are closely related to this new class. Statistical tests are developed to verify the significance of the evaluations generated by these indices. Finally, the class of indices is applied to Indonesian data to analyze the impact on financial crisis on the country’s social welfare using two waves of Indonesian Family Life Surveys (IFLS).

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Authors and Affiliations

  1. Oxford Poverty and Human Development Initiative (OPHI), Department of International Development, University of Oxford, 3 Mansfield Road, Oxford, OX1 3TB, UK

    Suman Seth

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  1. Suman Seth
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Correspondence to Suman Seth.

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I am grateful to James Foster, John Weymark, Jennifer Reinganum, Koen Decancq, Casilda Lasso de la Vega, Yanqin Fan, Chris Bennett and Ernesto Savaglio for helpful advice, comments, and support. This article is based on a background paper for the 2009 Latin America and the Caribbean Regional Human Development Report. I am grateful to the UNDP/RBLAC for financial support. The article has benefitted from the comments of the partipitants to the 9th International Meeting of the Society for Social Choice and Welfare 2008, Human Development and Capability Association International Conference 2008, Southern Economic Association Meetings 2008, and OPHI Wednesday Lunchtime Seminar Series, Oxford University, 2009.

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Seth, S. A class of distribution and association sensitive multidimensional welfare indices. J Econ Inequal 11, 133–162 (2013). https://doi.org/10.1007/s10888-011-9210-3

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