Alina Jedrzejczak, Ph.D., Chair of Statistical Methods, University of Lodz, Ul. Krzywickiego 23, Lodz, 90-149, Poland
Abbreviated social welfare functions, dependent on average income and a concentration coefficient, are a simple tool used for comparisons of income distributions. The social welfare function proposed by Sen is based on the Gini ratio which is considered to be the best synthetic measure of income inequality. This function can be generalized by introducing the parameter measuring the level of inequality aversion. The aim of our work was to testify the influence of particular income sources on overall income inequality and social welfare. To do this, the Gini index decomposition by income components was used. It allowed examining how policy changes concerning income distributions can be assessed in terms of their effect upon both inequality and the level of social welfare. The calculations were based not only on family income but also on equivalent income taking into account family size.