Walter Bosset & Conchita D'Ambrosio

Measuring Economic Insecurity

We provide an axiomatic treatment of the measurement of economic insecurity, assuming that individual insecurity depends on the current wealth level and its variations experienced in the past. Current wealth could also be interpreted as incorporating the individual's evaluation of future prospects. Variations in wealth experienced in the recent past are given higher weight than experiences that occurred in the more distant past. Twoclasses of measures are characterized with sets of plausible and intuitive axioms.