Change search
ReferencesLink to record
Permanent link

Direct link
Poverty and Welfare Measurement on the Basis of Prospect Theory
Stockholm University, Faculty of Social Sciences, The Swedish Institute for Social Research (SOFI).
2014 (English)In: The Review of Income and Wealth, ISSN 0034-6586, E-ISSN 1475-4991, Vol. 60, no 1, 182-205 p.Article in journal (Refereed) Published
Abstract [en]

This paper examines the measurement of social welfare, poverty, and inequality, taking into account features that have been found to be important welfare determinants in behavioral economics. Most notably, we incorporate reference-dependence, loss aversion, and diminishing sensitivity—aspects emphasized in Prospect Theory—to social welfare measurement. We suggest a new notion of equivalent income, the income level with which the individual would be as well off, evaluated using a standard concave utility function, as he actually is, evaluated with a reference-dependent utility function. We examine the differences between standard poverty and inequality measures based on observed income and measures that are calculated based on equivalent income. These differences are illustrated using household-level panel data from Russia and Vietnam.

Place, publisher, year, edition, pages
Wiley-Blackwell, 2014. Vol. 60, no 1, 182-205 p.
Keyword [en]
inequality, poverty, Prospect Theory, welfare measurement
National Category
URN: urn:nbn:se:su:diva-101659DOI: 10.1111/roiw.12095ISI: 000331273400009OAI: diva2:704886

AuthorCount: 4;

Available from: 2014-03-13 Created: 2014-03-13 Last updated: 2014-04-04Bibliographically approved

Open Access in DiVA

No full text

Other links

Publisher's full text

Search in DiVA

By author/editor
Jäntti, Markus
By organisation
The Swedish Institute for Social Research (SOFI)
In the same journal
The Review of Income and Wealth

Search outside of DiVA

GoogleGoogle Scholar
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

Altmetric score

Total: 28 hits
ReferencesLink to record
Permanent link

Direct link