A simple subgroup decomposable measure of downward (and upward) income mobility

Working Paper 2018-472

Abstract

We propose a subgroup decomposable class of income mobility measures with good axiomatic properties by adapting the concept of “individual income gap between two moments in time” to a framework that is traditionally used in the measurement of poverty and deprivation. This framework is explicit in incorporating the necessary judgements about how to aggregate individual income gaps by making use of the indices with best normative properties within the poverty literature. This strategy allows us to provide intuitive and simple measures of downward (and upward) mobility that consider incidence, intensity and inequality of income gaps and are easy to comprehend and communicate to policy makers. Moreover, these measures are consistent with a simple and intuitive graphical device. As an empirical illustration of the use of this class of measures, we present an analysis of downward income mobility for different age groups in three EU countries using the European Union Survey of Income and Living Conditions (EUSILC) longitudinal data from 2004 up to 2015.

Authors: Elena Bárcena, Olga Cantó.