RANKING INCOME DISTRIBUTIONS WHEN NEEDS DIFFER

We derive criteria for ranking income distributions where households d iffer in equity-relevant non-income characteristics ('needs'), using m ethods which do not require cardinal specifications of equivalence sca les. We consider comparisons for situations where the distributions of needs differ (e.g. cross-nationally or intertemporally), building on the results of Atkinson and Bourguignon (1987) and Atkinson (1992). Th e modifications required when the individual rather than the household is the income-receiving unit are also discussed. We illustrate the me thods with an analysis of changes in social welfare and poverty in the U.K. between 1981 and 1986.