Welfare as equity equivalents

Welfare as equity equivalents

Berger L., Emmerling J., (2020), Welfare as equity equivalents, Journal of Economic Surveys, June 13, 2020, DOI: 10.1111/joes.12368, webpage

Abstract

Equity (or, its counterpart, inequity) plays a fundamental role in the evaluation of social welfare in different dimensions. In this paper, we revisit the concept of inequity – in the sense of unequal distributions – across individuals, time, and states of the world using a unified framework that generalizes the standard expected discounted utilitarianism approach. We propose a general measure of welfare as equity equivalents and a corresponding inequity index. We show that allowing for different attitudes toward inequity across different dimensions covers a scope of possible inequity preferences with different interpretations. We then prove that the order of aggregation across the different dimensions matters for welfare evaluations. Finally, we show that many of the welfare‐theoretical approaches recently developed in the literature can be interpreted as special cases of this general framework.

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