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Analyzing Multidimensional Well-Being by Satya R. Chakravarty

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Chapter 2An Overview of Multidimensional Economic Inequality

2.1 Introduction

Use of one-dimensional indices of inequality for looking at inequality of well-being of a population or comparing it with that of another population is highly inappropriate. As we have argued in Chapter 1, well-being of a population is a multidimensional phenomenon. Even then most analyses of inequality have restricted themselves to the analyses of only one dimension of individual well-being, mainly income. Realization of this fact has recently motivated researchers to work on multidimensional economic inequality.

One simple approach to the measurement of multidimensional inequality is to examine dimension-by-dimension inequality levels (see, e.g., Atkinson et al., 2002; Fahey et al., 2005 and World Bank, 2005). For instance, if there are two dimensions of well-being, say income and health, we inspect inequality within each dimension. In consequence, by health inequality, we mean a summary measure of differences between people with respect to their health categories. It does not summarize the differences between income gradients of health, the effects of health on income (see Wagstaff et al., 1991; Wilkinson, 1996; Wagstaff, 2002; Lokshin and Ravallion, 2008; and Decancq and Lugo, 2012). (See also O'Donnell et al., 2015.)

But this extremely simple dimension-by-dimension dashboard approach ignores one noteworthy issue of multivariate analysis of inequality, possible correlation, a measure of association, ...

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