Human
Development
Maria Ana Lugo
University of Oxford
20
th
Sept 2004
maria.lugo@economics.ox.ac.uk
2
Purpose
Maps
Ad hoc:
11
4. How do we compare two
distributions?
Other two relative measures
1
_
1
1 ,
]
1 1
1
(1 ) ( )
i
x
GE
n x
1
_
1
1 ,
]
12
4. How do we compare two
distributions?
Formula Mean
Indep
Pop indep Pigou
Dalton
Decomposability Transfer sensitivity. Others
Range
R =
i i
Y Min Y Max
X
Ignores inside the extremes
Variance
V =
n
Y
i
2
) (
X
Relative Mean Deviation
M =
1
i
Y
n
X
Not sensitive to transfers among same
side of the mean income.
Gini Coefficient
G =
2
1
2
i j
j i
Y Y
n
X
Sensitive to centre of distrib depends
on # people between. Not incomes.
Standard deviation of logs
H =
2 / 1
2
log log
1
1
]
1
,
_
n
Y
X (might
violatefor very
high income)
More sensitive for transfer in the lower
end. Not defined for zero income
earnings
GE measures
GE
?
=
1
1
]
1
,
_
i
Y
Y
n
1
1
) 1 (
1
Depending on
Theil second = 0
L =
i
Y
Y
n
log
1
Very sensitive to lower end. Not
defined for zero income values
Theil index = 1
T =
Y
Y
Y
Y
n
i i
log
1
Sensitive to lower end
Coefficient of Variation = 2
GE
2
=
( )
2
2
1
CV
; CV =
V
Transfer neutrality, equally sensitive to
all income transfers
Atkinson ()
A
?
=
/ 1
1
1
1
1
]
1
,
_
Y
Y
n
i
X
Depending on
13
4. How do we compare two
distributions?
2.Orderings (CD)
Lorenz Curves (1905)
Atkinson (1970): LC if do not cross, then any measure
satisfying above axioms would rank distributions equally
=> we do not have to worry about which one to use
Percentage of Population
(y)
Percentage
of Income
Line of Perfect
Equality (LPE)
Lorenz Curve
L(y)  LC
0
1
1
F (y)
B
A
A
Gini
A B
+
14
4. How do we compare two
distributions?
No account of MD aspect
at unit level (only corr)
AGGREGATIVE
Summarises info, easy to
compare bt units
Have to impose
assumptions (values) on
w, ,
Commensurability
(units), types of vles
NONAGGREG
Deals with MD of unit
Difficult to implement
1
1
1
1
]
[ ]
1 1 1 1
( ) ( ), ( ), ( ) H D x y z
21
5. HDI and Inequality
Related questions

Should be the same for all dimensions? (see
Anand 2003) bc of nature of the dimension and
of the indicator used

How should be choose ?

Substitutability between inequality across
dimensions, but not between levels of
components (valid ? also for HDI).
22
6. Exercise Argentine
provinces
Exercise
Dimensions:
1991
f
2001
Stoch dom and measures 1991f 2001
Health (LE)
2001
f
1991
Stoch dom and measures 2001f 1991
Education
2001
f
1991
Stoch dom and measures 2001f 1991
Item byitem
Income distr worsen
Health and educ distr improved
NB: Low values of ineq (not sign different). Betweenineq is relevant
Stoch dom and measures 2001f 1991 Maasoumi
(1 w, 4 , 2 )
Different result from income distribution
Aggregative
Strategies
Bourguignon
(1 w, 4 , range0 1 )
Depends on values of and
if ? => 2001f 1991
if < => 1991f 2001
Two opposite results
24
Conclusions
Atkinsons 1
st
result: All measures imply assumptions
(embedded SWF) important to make them explicit and
understand them
Atkinsons 2
nd
result: Use LC criterion when possible
Or use one and give reason for choosing it over the others
25
Conclusions