Efficiency, Equity, and Generalized Lorenz Dominance

14 Pages Posted: 28 Mar 2001

See all articles by Christian Kleiber

Christian Kleiber

University of Dortmund - Department of Statistics

Walter Kraemer

University of Dortmund - Department of Statistics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: October 2000

Abstract

We decompose the generalized Lorenz order into a size and a distribution component. The former is represented by stochastic dominance, the latter by the standard Lorenz order. We show that it is always possible, given generalized Lorenz dominance between two distributions F and G, to find distributions H1 and H2 such that F stochastically dominates H1 and H1 Lorenz-dominates G, and such that F Lorenz-dominates H2 and H2 stochastically dominates G. We also show that generalized Lorenz dominance is characterized by this property and discuss the implications of these results for choice under risk.

Keywords: Income distribution, welfare dominance, Lorenz order, stochastic dominance, decisions under risk

JEL Classification: D31, D63, D81

Suggested Citation

Kleiber, Christian and Kraemer, Walter, Efficiency, Equity, and Generalized Lorenz Dominance (October 2000). Available at SSRN: https://ssrn.com/abstract=263325

Christian Kleiber

University of Dortmund - Department of Statistics ( email )

D-44221 Dortmund
Germany

Walter Kraemer (Contact Author)

University of Dortmund - Department of Statistics ( email )

D-44221 Dortmund
Germany
0231 755-3125 (Phone)
0231 755-5284 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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