Transfer Sensitive Inequality Measures

This paper proposes a new definition of transfer sensitivity based on the notion of "favorable composite transfers," which involve a regressive transfe r combined with a simultaneous progressive transfer at a lower income level. The paper proceeds to identify when one distribution can be o btained from another using a sequence of progressive transfers and fa vorable composite transfers, and hence when all transfer sensitive Pi gou-Dalton indices agree on their pairwise inequality ranking. Transf er sensitivity adds power to the "unambiguous" inequality judgments based on the Pigou-Dalton condition and enables distributions whose Lorenz curves intersect to be conclusively ranked. Copyright 1987 by The Review of Economic Studies Limited.