An Inter-temporal Relative Deprivation Index

Abstract

The paper provides an axiomatic characterization of a new class of relative deprivation indices. Relative deprivation is the feeling that an individual experiences when she compares herself with someone who is better off. We believe that individuals not only take care of their relative position with respect to others but also of their relative position with respect to their own past. Therefore, we introduce a history-regarding reference group, while in the traditional relative deprivation framework the reference group is only other-regarding. The new index is sensitive to the proximity of transfers in the reference groups: an individual may feel more deprived if an increase in achievements occurs close or far to her current position. The new index is illustrated with an application to EU countries.