The measurement of income mobility: A partial ordering approach

Summary.

Given a set of longitudinal data pertaining to two populations, a question of interest is the following: Which population has experienced a greater extent of income mobility? The aim of the present paper is to develop a systematic way of answering this question. We first put forth four axioms for income movement-mobility indices, and show that a familiar class of measures is characterized by these axioms. An unambiguous (partial) ordering is then defined as the intersection of the (complete) orderings induced by the mobility measures which belong to the characterized class; a transformation of income distributions is “more mobile” than another if, and only if, the former is ranked higher than the latter for all mobility measures which satisfy our axioms. Unfortunately, our mobility ordering depends on a parameter, and therefore, it is not readily apparent how one can apply it to panel data directly. In the second part of the paper, therefore, we derive several sets of parameter-free necessary and sufficient conditions which allow one to use the proposed mobility ordering in making unambiguous income mobility comparisons in practice.