Scale-Invariant Measurement of Inequality and Welfare in Ordinal Achievements: An Application to Subjective Well-Being and Education in OECD Countries

Abstract

Designing well-being policies often requires the use of qualitative data. In fact many dimensions of well-being have to be appraised through the use of an ordered status: that is the case with health, happiness and educational attainments. While it is important to look at the mean levels achieved by society, distributional features are also salient aspects for any evaluation exercises, as it is likely that strong disparities in achievements among the population will prevail in those dimensions. Nonetheless, standards tools for inequality analysis, essentially mean-based and thus scale-dependent, are not applicable in this context, as any choice of scale in an ordinal framework is likely to be arbitrary and subject to change. Relying on the median-based approach developed by Allison and Foster (J Health Econ 23: [505][506][507][508][509][510][511][512][513][514][515][516][517][518][519][520][521][522][523][524] 2004) for the measurement of self-reported health status inequality, this paper applies scale-invariant measures to subjective well-being and educational attainments in OECD countries using the 2010 round of the Gallup World Poll. This scale-invariant approach, applied to the case of three-category ordinal variables with identical median states, generates an unambiguous inequality and welfare ordering. This ranking is further completed by the computation of a scale-invariant inequality index. Both these measures aim to provide a robust picture of inequality and welfare in an ordinal context.

Multidimensional polarization for ordinal data

“…We are now ready to state the results of our empirical analysis. It complements the study made recently by Balestra and Ruiz (2015) who use the AF approach to compare OECD countries in terms of polarization in education and life satisfaction. However, they themselves mention that the shortcoming of their study is that they treat the two dimensions separately.…”

“…As mentioned, empirical application complements the study by Balestra and Ruiz (2015) (henceforth BR), who use the univariate AF relation. They acknowledge the need for the multidimensional extension of AF but their study lacks statistical analysis.…”

“…In a companion paper (Kobus and Kurek 2018) we develop statistical inference theory for these new measures. We use these results here to rank OECD countries in terms of educational and life satisfaction polarization, which complements the study by Balestra and Ruiz (2015).…”

Distributional Dynamics of Life Satisfaction in Europe

“…Dutta and Foster (2013) also studied inequality in happiness in the US for a longer period from 1972 to 2010, proposing a new indicator which can be decomposed by population subgroups. More recently, Balestra and Ruiz (2014) investigated inequality in life satisfaction for the OECD countries in 2010.…”

Happiness Inequality in Post-Socialist Countries during Neoliberal Transition

“…The existing literature suggests that using either ordinal or cardinal levels of measurement reflects SWB inequality accurately. For further discussion on the measurement issues regarding the cardinal or ordinal level treatments of happiness inequality, please seeBalestra and Ruiz (2015),Bechetti et al (2011), Cummins (2003,Dutta and Foster (2013),Fahey and Smith (2003),Gandelman and Porzecanski (2013),Kaljmin (2013),Ott (2005),Stevenson and Wolfers (2008), van Praag (2011) andYang et al (2019). Downloaded from Brill.com04/24/2023 02:59:31AM via free access…”