The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Stochastic Dominance

  • Russell Davidson
Reference work entry


Stochastic dominance is a term which refers to a set of relations that may hold between a pair of distributions. A very common application of stochastic dominance is to the analysis of income distributions and income inequality, the main focus in this article. The concept can, however, be applied in many other domains, in particular financial economics, where the distributions considered are usually those of the random returns to various financial assets. In what follows, there are often clear analogies between things expressed in terms of income distributions and financial counterparts.


Cumulative distribution functions Headcount ratio Inequality Kolmogorov–Smirnov test Lorenz curve Pareto principle Pigou–Dalton principle of transfers Poverty gap Poverty indices Poverty lines Restricted stochastic dominance Separability Social welfare function Statistical inference Stochastic dominance 
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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Russell Davidson
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