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Equivalent income versus equivalent lifetime: does the metric matter?

Published online by Cambridge University Press:  19 May 2023

Harun Onder ,
Pierre Pestieau  and
Gregory Ponthiere
Harun Onder
Affiliation:
The World Bank, 1818 H. Street NW, Washington, DC 20433 MSN: J5-504, United States
Pierre Pestieau
Affiliation:
University of Liege, CORE and Paris School of Economics 31 boulevard du Rectorat, 4000 Liege, Belgium
Gregory Ponthiere*
Affiliation:
UCLouvain, Hoover Chair in Economic and Social Ethics, College Dupriez, 3 Place Montesquieu, 1348 Louvain-la-Neuve, Belgium
*
Corresponding author: Gregory Ponthiere; E-mail: [email protected]
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Abstract

We examine the effects 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. The conditions under which the equivalent lifetime index exists are more restrictive than the ones under which the equivalent income index exists, but it is possible to define an alternative equivalent lifetime index, based on two reference income levels, for which the non-existence problem is less acute. Those indexes are also shown to satisfy different properties concerning interpersonal well-being comparisons, which can lead to contradictory rankings. While those incompatibilities arise under distinct indifference maps, we also explore the effects of the metric while relying on a unique indifference map, and show that, even in that case, the postulated metric matters for the measurement of well-being.

Keywords

Well-beingequivalent incomemeasurementvalue of life

JEL classification

J17: Value of Life • Forgone Income I31: General Welfare, Well-Being
Type
Research Paper
Information
Journal of Demographic Economics , First View , pp. 1 - 30
Copyright
Copyright © Université catholique de Louvain 2023

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