Intersecting generalized Lorenz curves and the Gini index

As is well known, the use of the Gini coefficient in comparisons is inconsistent with an utilitarian approach. This paper analyzes the Gini coefficient's normative significance in welfare comparisons evaluating income distributions according to Yaari dual social welfare function. When generalized Lorenz curves cross once, the Gini coefficient is decisive in determining welfare rankings if we strengthen the Principle of Transfers applying a Positional version of the Principle of Transfer Sensitivity. This result can also be extended to the case of multiple crossings. <!--ID="" This paper is based on my "Tesi di Laurea" at Bologna University. I am very grateful to my supervisor Vincenzo DenicolÔ, whose suggestions, comments, and encouragement have been crucial for this work. I am also indebted to Peter Lambert, Pietro Muliere and two anonymous referees for helpful comments. Responsibility for any remaining errors is, of course, mine. Mailing address: Department of Economics, University of York, Heslington, York Y01 5DD, UK (e-mail: czoli@racine. ravenna.it)-->