Arbeitspapier
Consensus income distribution
In determining the optimal redistribution of a given population's income, we ask which factor is more important: the social planner's aversion to inequality, embedded in an isoelastic social welfare function indexed by a parameter alpha, or the individuals' concern at having a low relative income, indexed by a parameter beta in a utility function that is a convex combination of (absolute) income and low relative income. Assuming that the redistribution comes at a cost (because only a fraction of a taxed income can be transferred), we find that there exists a critical level of beta below which different isoelastic social planners choose different optimal allocations of incomes. However, if beta is above that critical level, all isoelastic social planners choose the same allocation of incomes because they then find that an equal distribution of incomes maximizes social welfare regardless of the magnitude of alpha.
- Language
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Englisch
- Bibliographic citation
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Series: ZEF Discussion Papers on Development Policy ; No. 227
- Classification
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Wirtschaft
Personal Income, Wealth, and Their Distributions
Welfare Economics: General
Equity, Justice, Inequality, and Other Normative Criteria and Measurement
Taxation and Subsidies: Efficiency; Optimal Taxation
Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs
- Subject
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Maximization of social welfare
Isoelastic social welfare functions
Deadweight loss of tax and transfer
Concern at having a low relative income
Social planners' aversion to inequality
- Event
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Geistige Schöpfung
- (who)
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Stark, Oded
Falniowski, Fryderyk
Jakubek, Marcin
- Event
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Veröffentlichung
- (who)
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University of Bonn, Center for Development Research (ZEF)
- (where)
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Bonn
- (when)
-
2016
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Stark, Oded
- Falniowski, Fryderyk
- Jakubek, Marcin
- University of Bonn, Center for Development Research (ZEF)
Time of origin
- 2016
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