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Weights and substitution degree in multidimensional well-being in China

Esfandiar Maasoumi (Department of Economics, Emory University, Atlanta, GA, USA)
Tong Xu (Department of Economics, Emory University, Atlanta, GA, USA)

Journal of Economic Studies

ISSN: 0144-3585

Article publication date: 12 January 2015

Abstract

Purpose

The purpose of this paper is to combine multidimensional welfare analysis and entropy metrics to derive not only the best relative weights but also substitution degree among different attributes to construct multidimensional indices of well-being with Chinese Household Income Project Survey 2002 data.

Design/methodology/approach

The authors follow Maasoumi’s two-step measures of multivariate inequality to calculate the inequality for three social groups in China, urban residents, migrants, and rural residents. The two-step approach provides an aggregation formula which is numerically identified in this paper based on a metric entropy distance measure between the distribution of the aggregate well-being functions, on the one hand, and the distribution of the self-reported “happiness” indicator. The authors compare the differences in relative weights and substitution degree for the three groups, and link them to some institutional factors.

Findings

The authors find that incorporating substitution among attributes, and taking into consideration group heterogeneity are very important in multidimensional analysis of well-being.

Originality/value

The two-step approach provides an aggregation formula which is numerically identified in this paper based on a metric entropy distance measure between the distribution of the aggregate well-being functions, on the one hand, and the distribution of the self-reported “happiness” indicator.

Keywords

Acknowledgements

© Asian Development Bank. The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies or the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. By making any designation of or reference to a particular territory or geographic areas, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area.

JEL Classification — I31, C43

The authors would like to thank Le Wang and anonymous referees and Almas Heshamti for comments and suggestions. The usual disclaimer applies.

Citation

Maasoumi, E. and Xu, T. (2015), "Weights and substitution degree in multidimensional well-being in China", Journal of Economic Studies, Vol. 42 No. 1, pp. 4-19. https://doi.org/10.1108/JES-04-2014-0055

Publisher

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Emerald Group Publishing Limited

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