COLOR AND DISCOVER A Journey through Central America's Past

According to the arguments about longer-term inequality reduction, incomemobility is socially desirable for instrumental reasons rather than for its own sake.That is, society is assumed to care about income inequality (less is better, otherthings being equal), but inequality is assessed using longer-term incomes andyear-to-year mobility means that the inequality of this distribution is less thanthe inequality of incomes in any particular year. The normative content of themobility principle therefore hinges on views concerning the nature and validityof the benchmark that is provided by the distribution of longer-term incomes. AsShorrocks points out, 2 there is‘the presumption that individuals are indifferent between two incomestreams offering the same real present value. This might be true ifcapital markets were perfect (or if there was perfect substitutability ofincome between periods), but it seems likely that individuals are concernedwith both the average rate of income receipts and the patternof receipts over time. We may go further and suggest that individualstend to prefer a constant income stream, or one which is growingsteadily, to one which continually fluctuates’ (Shorrocks, 1978, p.392)Thus, the argument is not only about the feasibility of smoothing incomes toachieve the longer-term average, but also the undesirability of the uncertainty associatedwith a fluctuating income stream.This brings us to the fourth concept of income mobility, as income risk. Toillustrate this, Shorrocks defines for each individual a ‘constant income flow rate2 Shorrocks also draws attention to the assumption that the same measure should be used tosummarise both the dispersion of longer-period incomes and the dispersion of per period incomes.15