A TREATMENT OF ABSOLUTE INDICES OF POLARIZATION*

Absolute polarization indices remain unchanged under equal absolute augmentation in all incomes. This paper identifies the class of absolute polarization indices whose orderings of alternative income distributions agree with the rankings generated by nonintersecting absolute polarization curves. We explore the possibility of using the Kolm (1976) – Blackorby‐Donaldson (1980) ethical absolute inequality index in polarization measurement. We establish that although inequality and polarization are dissimilar concepts, different absolute inequality indices can be employed to design alternative absolute polarization indices. A numerical illustration is provided using Indian data and it is shown that inequality and polarization are different issues in income distribution analysis.     

DEPRIVATION,INEQUALITY AND WELFARE*

Welfare ranking of income distributions involves a trade‐off between equity and efficiency. A person's feeling of deprivation about higher incomes may be of a relative or absolute type. We consider an intermediate notion of deprivation, a convex mix of relative and absolute deprivations. We then look at the problem of welfare ranking of income distributions when welfare increases under a globally equitable redistribution and under an income increase that keeps intermediate deprivation fixed. All deprivation indices can be regarded as inequality indices but the converse is not true. We also provide a numerical illustration of our results.     

Ambiguity and Accident Law

Environmental accidents often involve ambiguous risks, i.e., the relevant probabilities are unknown. This paper studies how liability rules are affected by ambiguity. The injurer and the victim choose a level of care, which is observable, and an unobservable action. Both actions may affect the size and/or likelihood of loss. We analyze the welfare implications of tort rules. First, we show that with ambiguity, negligence is likely to perform better than strict liability. Second, we propose a tort rule of negligence and punitive damages, which gives the efficient levels of both care and unobserved actions.     

Discrimination via Exclusion: An Experiment on Group Identity and Club Goods

We study using laboratory experiments the impact on cooperation of allowing individuals to invest in group‐specific, excludable public goods. We find that allowing different social groups to voluntarily contribute to such goods increases total contributions. However, a significant proportion of that contribution goes toward the group‐specific club good rather than the public good, even when the latter has higher financial returns to cooperation. We find significant evidence of in‐group biases, which are manifested by positive in‐group reciprocity. That is, club goods allow subjects to display their preferences for interaction with their in‐group members, as well as positive in‐group reciprocity.