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Welfare Comparisons: Sequential Procedures for Heterogeneous Populations
Author(s) -
Lambert Peter J.,
Ramos Xavier
Publication year - 2002
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/1468-0335.00300
Subject(s) - equivalence (formal languages) , dominance (genetics) , stochastic dominance , welfare , econometrics , economics , computer science , mathematical economics , mathematics , biology , market economy , biochemistry , discrete mathematics , gene
Some analysts use sequential dominance criteria, and others use equivalence scales in combination with non‐sequential dominance tests, to make welfare comparisons of joint distributions of income and needs. In this paper we present a new sequential procedure which copes with situations in which sequential dominance fails. We also demonstrate that the recommendations deriving from the sequential approach are valid for distributions of equivalent income whatever equivalence scale the analyst might adopt. Thus, the paper marries together the sequential and equivalizing approaches, seen as alternatives in much previous literature. All results are specified in forms that allow for demographic differences in the populations being compared.