Description and contextualization of the subject

Social Choice theory is concerned with the analysis of collective decision-making procedures. It includes the study of several models for aggregating individual inputs into collective outputs such as methods of voting, utilitarian and egalitarian methods and so on, as well as with the foundations of social welfare. The course deals with both theoretical and empirical questions and devote some hours to explore STATA possibilities in this field.

Learning outcomes of the subject

By the end of the course you will be able to:

1. be familiar with the most used inequality, poverty and welfare indicators;

2. recognize the different properties and behaviours of those indicators;

3. distinguish the different approaches to measure inequality and poverty;

4. understand how inequality and poverty are measured in practice;

5. make robust comparisons using the Lorenz curves, the generalized Lorenz curves and the TIP curves;

6. use inequality and poverty modules in STATA;

7. use empirical evidence to interpret the evolution of inequality and poverty;

8. locate efficiently a facility;

9. understand the equality / efficiency dilemma;

10. find the location of a facility under an egalitarian, utilitarian, maxmin,

minmax or leximin criteria;

11. share project costs under an egalitarian or maximin criteria;

12. be familiar with the basic voting rules: majority, weighted majority,

qualified majority, Condorcet’s winner, Borda’s method and dictatorship;

13. understand the basic properties satisfied by a social aggregator: anonymity, positive responsive, neutrality, unanimity and independence of irrelevant alternatives;

14. show if a given rule satisfies some properties.

Ordinary call: orientations and renunciation

Coursework will be weighted as follows:



Final exam 35 %

STATA assignment 30 %

Additional assignments 25 %

Attendance + in-class assignment points 10 %



• More than two unexcused absences may result in a failing grade for the attendance contribution.

Temary

1 Inequality, Poverty and Welfare



1.1 Theoretical issues

• Basic notions about inequality measures: anonymity, population invariance, relative and absolute invariance and Pigou-Dalton transfer principle.

• Relative measures: the Gini index, the Generalized Entropy indices and the Atkinson family.

• Absolute measures: the absolute Gini, the variance and the Kolm family.

• Lorenz curves and Lorenz dominance.

• Decomposability and subgroup consistency: the GE family.

• Social Welfare based (normative) Inequality Measures: the Atkinson indices.

• Basic notions about poverty measures: poverty lines and the FGT family.



1.2 Applied issues: working with Stata.

• Basic Packages

• Microdata

• Computing Inequality and Poverty measures.

• Drawing Inequality and Poverty curves.



2 Social Welfare Aggregators



2.1 When preferences are defined through utility functions

• The framework

• Egalitarianism versus (classical) Utilitarianism:

• Egalitarian principle

• Unanimity (or Pareto optimality) principle

• The equality-efficiency dilemma

• The maximin utility program

• The leximin social welfare ordering

• Classical Utilitarianism

• Examples



2.2 When the ranking of preferences is ordinal

• The framework with only two alternatives. Basic properties for a social

aggregator. May’s Theorem.

• The framework with more than two alternatives. Basic properties for a

social aggregator. Arrow’s Impossibility Theorem.

Bibliography

Basic bibliography

Basic references for Topic 1



Chakravarty S. (2009), Inequality, Polarization and Poverty, (online edition available in the library website)



Cowell F. (2009), Measuring Inequality http://econdse.org/wp-content/uploads/2012/02/Cowell-measuring- inequality.pdf



Subramanian, S. (2019), “Inequality and Poverty: A Short Critical Introduction”, SpringerBriefs in Economics, Springer.



Basic references for Topic 2



Moulin H. (1991) Axioms of cooperative decision making, Cambridge

University Press, Chapter 1.

Journals

Journal of Economic Inequality: https://www.springer.com/journal/10888.



Review of Income Inequality: https://onlinelibrary.wiley.com/journal/14754991?af=R.



Social Choice and Welfare: https://www.springer.com/journal/355.

Links

INE https://www.ine.es/