Does less inequality among households mean less inequality among individuals?

Abstract

Consider an income distribution among households of the same size in which individuals, equally needy from the point of view of an ethical observer, are treated unfairly. Individuals are split into two types, those who receive more than one half of the family budget and those who receive less than one half. We look for conditions under which welfare and inequality quasi-orders established at the household level still hold at the individual one. A necessary and sufficient condition for the Generalized Lorenz test is that the income of dominated individuals is a concave function of the household income: individuals of poor households have to stand more together than individuals of rich households. This property also proves to be crucial for the preservation of the Relative and Absolute Lorenz criteria, when the more egalitarian distribution is the poorest. Extensions to individuals heterogeneous in needs and more than two types are also provided. © 2005 Elsevier Inc. All rights reserved.