Melbourne Institute of Applied Economic and Social Research - Research Publications

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On the Measurement of Intermediate Inequality: A Dominance Criterion for a Ray-Invariant Notion

AZPITARTE, F ; Alonso-Villar, O ; Bishop, JA ; Rodriguez, JG (Emerald Publishing, 2014-09-30)

This paper introduces a unit-consistent Lorenz dominance criterion that allows ranking income distributions according to centrist measures a` la Seidl and Pfingsten (1997). In doing so, it defines α-Lorenz curves that generalize the absolute Lorenz curve. These curves allow implementing unanimous rankings for a broad set of centrist inequality notions, whereas they become closer and closer to the absolute curve when α approaches equity. In addition, this paper provides an empirical illustration of these tools using Australian income data. The results suggest that despite the reduction of relative inequality for Australian-born people between 1999 and 2003, their inequality increased for most centrist value judgments.