Advantageous redistribution with three smooth CES utility functions |
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| Institution: | 1. Nanyang Technological University, Singapore;2. World Bank, United States;1. Department of Neurology, Henry Ford Health System, Detroit, MI 48202, USA;2. Department of Physics, Oakland University, Rochester, MI 48309, USA;3. Department of Neurosurgery, Henry Ford Health System, Detroit, MI 48208, USA;1. Department of Applied Mathematics, Donghua University, Shanghai 200051, China;2. School of Information Science and Technology, Donghua University, Shanghai 200051, China;3. College of Information Science and Engineering, Shanxi Agricultural University, Taigu, Shanxi 030801, China;4. Department of Computer Science, Brunel University London, Uxbridge, Middlesex UB8 3PH, United Kingdom;5. Faculty of Engineering, King Abdulaziz University, Jeddah 21589, Saudi Arabia;6. Department of Mathematics, Quaid-i-Azam University, Islamabad, Pakistan |
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| Abstract: | We present a parametric example of three-country advantageous redistribution with two Cobb–Douglas utility functions and one CES utility function for which the elasticity of substitution is 1/2. This paper indicates that the possibility of advantageous redistribution strongly depends on the three countries’ taste patterns, endowment distributions, and the elasticity of substitution. In particular, we will show with specific examples that greater difference between the donor and recipient’s taste patterns and a lower elasticity of substitution can increase the chance of advantageous redistribution. |
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| Keywords: | Advantageous redistribution Transfer paradox CES utility |
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