Equity aversion, inequality aversion and economic welfare: On the macroeconomic substantiation of microeconomic utility functions

Arbeitspapier

In this paper, we first model the dynamics of an economy, making use of a simple, almost trivial circular flow analysis. Then, we demonstrate the effects of "keeping up with the Joneses" as well as of "keeping ahead of the Smiths" in private consumption and the role of innovation and imitation for private investment and economic growth. In either case, we detect both a tendency towards convergence (inequity aversion) and towards divergence (equity aversion) in the macro economy. On the background of the macroeconomic analysis we then turn to a microeconomic view and discuss how the characteristics, functions and findings of selected fairness models which include social preferences change when "equity aversion" is integrated into the theoretical framework. Thereafter, the collected results of both micro and macroeconomic analysis allow us to draw a series of conclusions concerning economic policy in different areas.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Volkswirtschaftliche Diskussionsbeiträge ; No. 2009,2

Classification and Topics

• Classification: Wirtschaft ; Macroeconomics: Consumption; Saving; Wealth ; Investment; Capital; Intangible Capital; Capacity ; Equity, Justice, Inequality, and Other Normative Criteria and Measurement ; Microeconomic Behavior: Underlying Principles
• Subject: economic welfare ; inequity aversion ; fairness concepts ; Gerechtigkeit ; Soziale Wohlfahrtsfunktion ; Konsuminterdependenz ; Makroökonomik ; Kreislaufanalyse ; Konsumentenverhalten ; Investition ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Sell, Friedrich L. ; Stratmann, Felix
• Event: Veröffentlichung
• (who): Universität der Bundeswehr München, Fachgruppe für Volkswirtschaftslehre
• (where): Neubiberg
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/32831
• Last update: 10.03.2025, 11:43 AM CET