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The Impact of a Marginal Subsidy on G ini Indices
Author(s) -
Corvalan Alejandro
Publication year - 2014
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/roiw.12010
Subject(s) - economics , subsidy , inequality , normative , inequity aversion , economic inequality , marginal utility , econometrics , distribution (mathematics) , income distribution , microeconomics , welfare economics , mathematical economics , mathematics , mathematical analysis , philosophy , epistemology , market economy
This paper addresses the impact of a subsidy—an increase in someone's income—on generalized G ini inequality indices. We show that for any distribution of income there exists a “pivotal individual” such that an increment given to an individual poorer (resp. richer) than himself, decreases (resp. increases) inequality. We characterize the pivotal individual for relative and absolute G ini indices. We show that normative prescriptions about the preferred level of inequality aversion can also be formulated in terms of the pivotal, namely the richest individual that we find just to compensate.