Lorenz Dominance and Welfare: Changes in the U.S. Distribution of Income, 1967-1986

Authors:
  • JBJohn A. Bishop
    John A. Bishop
  • JFJohn P. Formby
    John P. Formby
  • WSW. James Smith
    W. James Smith
Publisher website
Google Scholar
Abstract
This paper examines income inequality in the United States over the period 1967-1986 using recently developed tests for differences in Lorenz curves. We are able to rank 18 of 19 annual comparisons. In contrast, standard techniques are able to rank only 12. These results suggest that the Lorenz dominance principle is more empirically relevant than previously thought. The tests reveal a sharp rise in U.S. inequality between 1978 and 1982 as well as a shift toward greater inequality over the entire period. We also examine changes in economic welfare using the joint mean-Lorenz dominance principle.