Distributional divergence as a unifying measurement framework

Abstract

The measurement of various economic phenomena, including income inequality, poverty, richness, inequality-of-opportunity, horizontal equity, mobility, wage discrimination and goodness of fit, are examples of the measurement of the divergence between distributions. In all these examples there is a reference distribution and the aim is to examine to what extent any given distribution differs from the reference one. By providing an axiomatic characterization of a family of indices for measuring divergence between distributions, this paper provides a unifying framework for incorporating the measurement of many economic phenomena, while exploring the relationship of the derived family of indices to other existing measures.