A general rank‐dependent approach for distributional comparisons

This paper provides a normative model for distributional comparisons that can be easily adapted for the evaluation of public policies. This model considers individuals whose well‐being is characterized by a monetary and a nonmonetary dimension. It also accounts for inequality at the top and bottom of the distribution of both dimensions. It derives third‐order inverse stochastic dominance conditions for classes of social welfare functions satisfying: (i) threshold dependent positional transfer (TDPT) sensitivity with respect to the monetary dimension; (ii) TDPT combined with downside inequality aversion with respect to the nonmonetary dimension; (iii) TDPT combined with upside inequality aversion with respect to the nonmonetary dimension. This paper's results emerge along with the existing one supporting downside inequality aversion both with respect to the monetary and nonmonetary dimension, and upside inequality aversion with respect to the monetary dimension.