Unit‐Consistent Decomposable Inequality Measures | Zendy

ZHENG BUHONG | Zendy

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Unit‐Consistent Decomposable Inequality Measures

Author(s) -

ZHENG BUHONG

Publication year - 2007

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/j.1468-0335.2006.00524.x

Subject(s) - axiom , mathematics , inequality , consistency (knowledge bases) , class (philosophy) , mathematical economics , unit (ring theory) , entropy (arrow of time) , extension (predicate logic) , econometrics , log sum inequality , axiom independence , measure (data warehouse) , discrete mathematics , computer science , mathematical analysis , data mining , physics , geometry , mathematics education , quantum mechanics , artificial intelligence , programming language

This paper introduces a new axiom—the unit consistency axiom—into inequality measurement. This new axiom requires the ordinal inequality rankings (rather than the cardinal indices) to be unaffected when incomes are expressed in different units. I argue that unit consistency is an indispensable axiom for the measurement of income inequality. When unit consistency is combined with decomposability, I show that the unit‐consistent decomposable class of inequality measures is a two‐parameter extension of the one‐parameter generalized entropy class. The extended class accommodates a variety of value judgments and includes different types of inequality measures.

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