On the characterization and economic evaluation of income mobility as a process of distributional change
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The paper employs a rank-dependent formulation of the social welfare function with time-separable utilities to evaluate the economic consequences of the mobility process underlying the transformation of the income distribution over time. The resultant class of measures can be decomposed either in terms of structural and exchange mobility or in terms of vertical and horizontal mobility, thereby encompassing two major approaches in the literature. Illustrative results show that income mobility in the USA was both less pro-poor in absolute terms and more horizontally inequitable than in Germany, but that the latter did not translate into higher exchange mobility given higher levels of absolute inequality and the vertical stance of the growth process. © 2011 Springer Science+Business Media, LLC.