Social Welfare, Income, Consumption, Energy, and the Inequality Aversion of Society – a Case Study from Germany

Abstract

The basis for measuring the distribution of income and consumption is the social welfare function. The Atkinson index is an inequality measure based on the social welfare function. Our analysis shows that the social welfare function and the Atkinson index provide a powerful tool not only to measure the social welfare and the distribution of income in Germany but also to estimate for the first time the distributional dimensions of consumption and energy expenditures in Germany. With the epsilon parameter, the Atkinson index explicitly reveals the inequality aversion of society. The epsilon represents the social trade-off be- tween social equality and economic efficiency and represents a connection be- tween the universal equal political rights of the citizens and the efficiency crite- rion of the economy. For our analysis, we used disaggregated consumption and income data from the German Household Expenditure Survey conducted by the German Federal Statistical Office. The results of applying social welfare functions and the Atkinson index could make a significant contribution to science and policy de- bates on social welfare, income, consumption and energy equity in Germany.