The measurement of structural and exchange income mobility

Abstract

Chakravarty, Dutta and Weymark (1985) present axioms for an ethical index of relative income mobility in a two-period world. This paper suggests a decomposition of this index into i) an index of structural mobility, which captures the welfare effect of differences in the inequality of the cross-section income distributions; and ii) an index of exchange mobility, which captures the welfare impact of permutations or rank reversals between the first-and the secon-period income distributions. We propose a second decomposition in order to isolate the effect on mobility of mean incomes changes. The properties of all the income mobility concepts introduced in the paper do not require any new value judgements beyond the traditional ones.