Relative Deprivation, Reference Groups and the Assessment of Standard of Living

Economic Systems (Impact Factor: 0.61). 03/2012; 36(1). DOI: 10.1016/j.ecosys.2011.04.006

ABSTRACT This paper proposes two new indices of relative deprivation, derived from an extension of the concept of the generalized Gini for the measurement of distributional change. Population- and income-weighted relative deprivation indices are then defined and, using panel data from the Consortium of Household Panels for European Socio-Economic Research, this paper checks which of the various ways of defining individual deprivation best fits the answers given by individuals on the degree of their satisfaction with income. The analysis finds that the deprivation indices proposed are consistently and negatively correlated with income satisfaction as reported by respondents, that income weighted measures fit better than population weighted measures, and that this fit improves with countries that experienced deep institutional changes such as the transitional economies of Eastern Europe.

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    ABSTRACT: Distributional patterns evolved quite differently and stabilized at diversified levels across the Central–Eastern European and former Soviet Union countries which underwent transition. In this paper we provide an overview of income inequality dynamics for 22 transition countries from 1989 to 2008 and of the explanations and interpretations proposed by the main literature. We then highlight that while the effects of different transition approaches on output dynamics and other macroeconomic aggregates have been largely analysed, scarce attention has been devoted so far to their impact on distributive patterns. However, this kind of analysis might usefully contribute to complete the complex picture of the many social, economic and structural factors affected by transition and provide useful policy insights for those countries still experiencing deep institutional change.
    Economic Systems 03/2012; 36(1):2-10. DOI:10.1016/j.ecosys.2011.09.001 · 0.61 Impact Factor

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