Assessing Global Inequality in Well-being Using Generalized Entropy Measures

Abstract

In this paper we study global inequality in well-being taking as a reference the Human Development Index. One of the main changes applied to this indicator was the substitution of the arithmetic mean for a geometric mean in the construction of the index, thus assuming different substitution grades between dimensions. In order to determine the impact of the aggregation formula in the distribution of the HDI, we propose the use of multidimensional generalized entropy measures, which allow us to study the evolution of well-being inequality based on different aggregation schemes. The results obtained suggest a reduction in global inequality in human development over the period 1980- 2011. However different inequality patterns are observed depending on the substitutability parameter, thus pointing out the crucial role played by the aggregation formula of composite indices of well-being in the evolution of global inequality.