Decancq K., Zoli C. (2014).
Long term social welfare: mobility, social status, and inequality. (ISSN: 2036-2919 N°19). University of Verona DSE Working Paper series.
Recently there has been a growing interest in the empirical association between income inequality and social mobility. Little is known on the normative nexus between both notions, however. In this paper, we axiomatically characterize a family of multiperiod social evaluation functions that allows to include concerns about income inequality and social mobility in a transparent and explicit way. The two core ideas of our characterization are a requirement of consistency of the social evaluation for the addition of an income source with the same mobility structure, and the requirement that the effect of social mobility vanishes when there is no inequality in the society or a subgroup thereof. We obtain a multiperiod rank-dependent social evaluation function that additionally gives a prominent role to the notion of social status in this dynamic context. We discuss various special cases that belong to the characterized family of social evaluation functions, and we present a welfare decomposition that combines in an intuitive way the key components of the evaluation: average income, income inequality and mobility.