Abstract
The society's aversion to inequality and aversion to poverty principles are introduced as primitive assumptions from which the Pigou-Dalton principle of transfers is deduced. These principles also substantiate the quasiconcavity of the utility function (social welfare gain) and quasiconvexity of the disutility function (social welfare loss) of each economic unit, allowing the partition of this income into (1) social welfare gain and (2) social welfare loss. The resulting analytical framework is used to discuss and analyze the social welfare bases of income inequality and conversely. Four income inequality measures and implied social welfare functions are considered: Theil, generalized entropy, Atkinson, and Gini.
Published Version
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