Ricerc@Sapienza

We propose a social welfare function to evaluate a pro le of income streams and compare the welfare gain of the actual pro le relative to the income pro le where the individual receives his rst period income in each period. We derive necessary and sucient conditions for the welfare gain to be positive, and show how this welfare gain can be decomposed in a pure effect of economic growth, a mobility effect and a cost due to aversion to time fluctuations given individuals' ranks in the income distribution.

We evaluate social progress on the basis of panel data on individual incomes by comparing the value of social welfare in the observed panel data to its value in a situation where individuals receive their first period income in each period. We derive necessary conditions for the welfare gain to be positive, and show how it can be decomposed in an effect of economic growth, a mobility effect and a cost due to aversion to time fluctuations given individuals’ ranks in the income distribution.