Comparing Income Distributions Using Atkinson’s Measure of Inequality

Abstract

This paper is aimed at undergraduate and graduate economics students, and public sector economists, who are interested in inequality measurement. It examines the use of the Atkinson inequality measure to compare income distributions. A major feature of this measure is that distributional value judgements are made explicit, via the use of a particular form of Social Welfare Function. Emphasis is given to the interpretation of changes in inequality and the role of the relative inequality aversion parameter, which reflects an important feature of those value judgements.