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*responsible for 16, 8 and 9, and Monday’s lecture
Poverty dominance and welfare dominance both have the same idea. That is that you look at the
distribution of income and you look at the cumulative distribution function (proportion of income recipients
who have incomes below a certain level)
Example of firstorder welfare dominance: for any income you choose between 0 and the maximum, there
are more people who have incomes below that income in B than A – we would say that A is dominant.
Remember the double check the axises. The handout on Asia has the axis reversed.
Poverty dominance chooses the lowest poverty line that you might imagine, and the highest poverty line
that you might imagine. Each poverty line is denoted by Z.
If you don’t have first order dominance, you may be able to determine that there is a lower order of
dominance – which means a weaker relationship.
When would you use a nondirectional income mobility mechanism? If you’re interested in knowing how
variable peoples’ incomes are in an economy, how often they fluctuate
Intertemporal transition matrices:
For those people who started in quintile one, where did they end up? We can measure that in terms of
numbers of people, or we can measure it as percentages of people so that all of those numbers together
add up to 100%. This gives an indication of how many people or what proportion of people started in any
of the five rows and ended up in any of the five columns.
Why do we use logs?
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 Spring '09
 FIELDS

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