Welfare comparisons of income distributions and family size: An individualistic approach

Abstract

We investigate the problem of how to perform comparisons of income distributions across families of different sizes. We argue that social welfare ought to be computed as the average individual utility instead of the average household utility as in most known criteria. We provide dominance criteria which allow for some indeterminacy about the average optimal family size, by resorting to the bounded approach to dominance analysis proposed by Fleurbaey et al. (2003). Indeed, when differences in needs come from family size, a specific population allocation problem (how a population should be optimally divided over families for given resources) adds to the usual income allocation problem. Pro-family and anti-family stances are introduced in order to make explicit the choice of an optimal family size. An application to French data shows that shifting from the household to the individualistic point of view can substantially alter the outlook of dominance results.