What do normative indices of multidimensional inequality really measure?

© 2015 Elsevier B.V. We argue that normative indices of multidimensional inequality do not only measure a distribution's extent of inequity (i.e., the gaps between the better-off and the worse-off), but also its extent of inefficiency (i.e., the non-realized mutually beneficial exchanges of goods). We provide a decomposition that allows us to quantify these two parts of inequality. Strikingly, the inequity component turns out to be a two-stage measure, that is, a measure that applies a unidimensional inequality measure to the vector of individual well-being levels. The decomposition also clarifies existing controversies surrounding two prominent transfer axioms, viz., uniform majorization and correlation increasing majorization. An application to inequality in human development illustrates the analysis.publisher: Elsevier articletitle: What do normative indices of multidimensional inequality really measure? journaltitle: Journal of Public Economics articlelink: http://dx.doi.org/10.1016/j.jpubeco.2015.03.003 content_type: article copyright: Copyright © 2015 Elsevier B.V. All rights reserved.status: publishe