Equivalent income versus equivalent lifetime: does the metric matter?

Produced by: 
Available from: 
July 2019
Paper author(s): 
Harun Onder
Pierre Pestieau
Grégory Ponthière
Topic: 
Financial Economics
Year: 
2019

We examine the e§ects of the postulated metric on the measurement of well-being, by comparing, in the (income, lifetime) space, two indexes: the equivalent income index and the equivalent lifetime index. Those indexes are shown to satisfy di§erent properties concerning interpersonal well-being comparisons, which can lead to contradictory rankings. While those incompatibilities arise under distinct indi§erence maps, we also explore the e§ects of the metric while relying on a unique indi§erence map, and show that, even in that case, the postulated metric matters for the measurement of well-being. That point is illustrated by quantifying, by those two indexes, the (average) well-being loss due to the Syrian War. Relying on a particular metric leads, from a quantitative perspective, to di§erent pictures of the deprivation due to the War.

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