Introduction

As Sen (1997) remarked, “… we ought to pay much more attention than we conventionally do to economic inequality in an appropriately broad sense, taking note of the fact that income inequality, on which economic analysis of inequality so often concentrates, gives a very inadequate and biased view of inequalities, even of those inequalities that can be powerfully influenced by economic policy.” One crucial aspect of economic resources in such a broad sense is wealth. Whether a person with low income also has a low or high stock of wealth, or works many or little hours, is important to determine her position in the distributions of economic resources and welfare. For instance, owning a house implies that the individual does not have to pay a large part of her income on rent. Having a (liquid) asset portfolio is implicit insurance against negative shocks as the consumption level can be maintained by selling assets. Taking a lifetime view, wealth is the initial endowment with assets and cumulated past savings but, from another perspective, wealth is also future consumption (including bequests). Working many hours and having a high wage to make a living possible implies a different individual welfare than working many hours in a precarious work situation with the same earnings. These examples indicate the importance to aggregating all these dimensions to determine well-being in a value function.

Tasks

1. Measuring the inequality of lifetime economic resources and well-being
2. Mobility of economic well-being