Fair welfare maximization

We consider the general problem of finding fair constrained resource allocations. As a criterion for fairness we propose an inequality index, termed “fairness ratio,” the maximization of which produces Lorenz-undominated, Pareto-optimal allocations. The fairness ratio does not depend on the choice of any particular social welfare function, and hence it can be used for an a priori evaluation of any given feasible resource allocation. The fairness ratio for an allocation provides a bound on the discrepancy between this allocation and any other feasible allocation with respect to a large class of social welfare functions. We provide a simple representation of the fairness ratio as well as a general method that can be used to directly determine optimal fair allocations. For general convex environments, we provide a fundamental lower bound for the optimal fairness ratio and show that as the population size increases, the optimal fairness ratio decreases at most logarithmically in what we call the “inhomogeneity” of the problem. Our method yields a unique and “balanced” fair optimum for an important class of problems with linear budget constraints.     

Preference for safety under the Choquet model: in search of a characterization

Victor prefers safety more than Ursula if whenever Ursula prefers a constant to an uncertain act, so does Victor. This paradigm, whose expected utility (EU) version is Arrow and Pratt’s more risk aversion concept, will be studied in the Choquet expected utility (CEU) model. Necessary condition Pointwise inequality between a function of the utility functions and another of the capacities is necessary and sufficient for the preference by Victor of safety over a dichotomous act whenever such is the preference of Ursula. However, increased preference for safety versus dichotomous acts does not imply preference by Victor of safety over a general act whenever such is the preference of Ursula. A counterexample will be provided, via the casino theory of Dubins and Savage. Sufficient condition Separation of the two functions by some convex function is sufficient for Victor to prefer safety more than Ursula, over general acts. Furthermore, a condition on the capacities will be presented for simplicity seeking, the preference by Victor over any act for some dichotomous act that leaves Ursula indifferent. This condition is met in particular if Victor’s capacity is a convex function of Ursula’s capacity. For these cases, the pointwise inequality (necessary) condition is a characterization of greater preference for safety, extending the Arrow–Pratt notion from EU to CEU and rank-dependent utility (RDU). These inequalities preserve the flavor of the “more pessimism than greediness” characterization of monotone risk aversion by Chateauneuf, Cohen and Meilijson in the RDU model and its extension by Grant and Quiggin to CEU. Preferences between safety and dichotomous acts are at the core of the biseparable preferences model of Ghirardato and Marinacci.     

Unfair inequality,governance and individual beliefs

Unfair inequality arises when incentives are not fairly tied to effort or investment across the socio-economic spectrum. The actual limitations on economic activity from this failure may depend on whether people believe the system is unfair, and how well governing institutions safeguard fair-play. In this paper, I study whether unfair wealth inequality is correlated with beliefs about fairness, and whether good governance can be a substitute in belief formations for decreases in unfair inequality. I find a that people in countries with recent increases in unfair wealth inequality are less likely to believe that inequality is due to fair processes. This relationship holds when“fair” determinants of inequality include effort, as well as moral and meritocratic components. The relationship is strongest in countries with poor quality governance. In countries with high quality governance, people appear to be more tolerant of unfair inequality, as it is only weakly reflected in their beliefs about process fairness.     

Dealing with preference uncertainty in contingent willingness to pay for a nature protection program: A new approach

In this paper, we propose an alternative preference uncertainty measurement approach where respondents have the option to indicate their willingness to pay (WTP) for a nature protection program either as exact values or intervals from a payment card, depending on whether they are uncertain about their valuation. On the basis of their responses, we then estimate their degree of uncertainty. New within this study is that the respondent's degree of uncertainty is “revealed”, while it is “stated” in those using existing measurement methods. Three statistical models are used to explore the sources of respondent uncertainty. We also present a simple way of calculating the uncertainty adjusted mean WTP, and compare this to the one obtained from an interval regression. Our findings in terms of determinants of preference uncertainty are broadly consistent with a priori expectations. In addition, the uncertainty adjusted mean WTP is quite similar to the one derived from an interval regression. We conclude that our method is promising in accounting for preference uncertainty in WTP answers at little cost to interviewees in terms of time and cognitive effort, on the one hand, and without researcher assumptions regarding the interpretation of degrees of uncertainty reported by respondents, on the other.     

Progressive Tax and Inequality in a Unionized Economy*

In this paper, we develop a heterogeneous-agent, endogenous growth model of a unionized economy with distinct progressive tax schedules on labor and capital income. With time preference heterogeneity, the effective labor force, balanced growth, and income inequality are endogenously determined, and these interact with each other. A reduction in the degree of progressive labor tax yields a “double-dividend” in terms of reducing income inequality and boosting economic growth, while capital income progressivity displays the usual growth–inequality trade-off. Particularly, the double-dividend effect becomes more pronounced when unionization is declined or trade unions become more wage-oriented, leading to the so-called “Cheshire cat” phenomenon.     

Economic Growth Evens Out Happiness: Evidence from Six Surveys

In spite of the great U‐turn that saw income inequality rise in Western countries in the 1980s, happiness inequality has fallen in countries that have experienced income growth (but not in those that did not). Modern growth has reduced the share of both the “very unhappy” and the “perfectly happy.” Lower happiness inequality is found both between and within countries, and between and within individuals. Our cross‐country regression results suggest that the extension of various public goods helps to explain this greater happiness homogeneity. This new stylized fact arguably comes as a bonus to the Easterlin paradox, offering a somewhat brighter perspective for developing countries.     

Distributional preference in Japan

Using experiments developed by Engelmann and Strobel ( 2004 ), this study investigates distributional preference in Japan. We find that just over half the people in the study have a maximin preference, approximately 7 to 19% have an efficiency preference, approximately 8% have a self‐interest preference, and approximately 18% chose the allocation that would reduce the payoff to the rich and the poor, given that her/his payoff would remain constant. The last preference could be interpreted as what is referred to as “malice”, “deep envy” or a “feeling of vulnerability” in behavioural economics and cross‐cultural psychology.     

UNIVERSALISM AND THE VALUE OF POLITICAL POWER

Although legislatures typically use majority rule to allocate a budget in distributive legislation, unanimous consent over the broad allocation of benefits is pervasive. I develop a game‐theoretic model where members strategically interact in a universal coalition to determine allocations, with noncooperative bargaining as a threat point for the breakdown of cooperation. To quantify the effects of political power on the agreed‐upon allocation, I structurally estimate the model using the “Bridge Bill Capital Budget” in 1992. I find that 16.73% of the budget would be allocated differently if allocations were determined only based on actual needs.     

Taylor rules: Consequences for wealth and income inequality

This paper compares the consequences of “active” vs. “passive” Taylor rules for wealth and income inequality. Since the distinction is operative only along transitional paths, we compare the implications for two forms of government expenditure that generate such transitions. Our results confirm that the contrasting effects obtained previously for the aggregate economy have significant distributional consequences. For an active Taylor rule, whether the government increases its expenditure on consumption, or productively, wealth inequality will increase. Expenditure on the two public goods yields divergent paths for income inequality. Government consumption expenditure raises income inequality; productive government expenditure reduces it. If the Taylor rule is passive, an increase in either form of government expenditure reduces wealth inequality initially and over time. Income inequality initially increases, but declines over time, although remaining above its previous steady-state level.     

Interpreting life-cycle inequality patterns as an efficient allocation: Mission impossible?

The life-cycle patterns of consumption, wage and hours inequality observed in U.S. cross-sectional data are commonly viewed as incompatible with a Pareto efficient allocation. We determine the extent to which these qualitative and quantitative patterns can or cannot be produced by Pareto efficient allocations in models with preference shocks, wage shocks and full information.     

On fair allocations

This paper examines the effects of fairness on economic behavior and allocations, where fairness is defined as the absence of envy among consumers. We use the benefit function to investigate the welfare cost of fairness. We show how fairness generates a form of altruism, captured by a “fair expenditure” function that depends on the distribution of welfare. We define the most efficient fair allocations and explore the implications of fairness for economic behavior, pricing and redistribution policies.     

The 2017 Veblen-Commons Award Recipient: John F. Henry: “Brutus Is an Honorable Man”

The question I pose in this article is just why, from its egalitarian foundations, inequality first arose. There is good information regarding how inequality has been defended over the millennia, but no answer as to why, from an egalitarian ideological foundation, some began to assert a superior position, while others — the vast majority, in fact — accepted this. In this historic process that leads to the current period, it appears that those asserting a superior position are of an “honorable” nature. That is, they tend to be mass murderers, fundamentally dishonest, hypocrites, and generally anti-social. Just why is this? Why are these “honorable men” of the Brutus type at the top of the social hierarchy? While Thorstein Veblen and Karl Marx have developed cogent analyses of inequality itself, neither has explained the origins of inequality in its break and separation from the original state of equality. I propose that this is a task for institutionalists, basing their argument on Veblen’s understanding of “institutions.”     

Inequality aversion and the house money effect

In this paper, we analyse if individual inequality aversion measured with simple experimental games depends on whether the monetary endowment in these games is either a windfall gain (“house money”) or a reward for a certain effort-related performance. We then examine whether the way of preference elicitation affects the explanatory power of inequality aversion in social dilemma situations. Our results indicate that individual inequality aversion measured by the model of Fehr and Schmidt (Quarterly Journal of Economics 114(3):817–868, 1999) is not generally robust to the way endowments emerge. The inequality aversion model has only low predictive power for individual behaviour. It performs best when the endowment is house money and relatively small.     

MEASURING INEQUALITY WITHIN THE HOUSEHOLD

The purpose of this paper is to explore a number of measures of inequality within households. We focus primarily on two types of inequality, first, inequality in money incomes, second, inequality in control over household resources. Control is measured in two ways: first, as control over the management of household finances and, second, as influence over household decision-making. We discuss arguments for and against each of the measures of inequality, and compare the measures against one another in terms of the level of inequality each measure finds. The paper does not attempt to explain inequality; instead, its aim is to discuss the question “What is it that we wish to explain?”

相似文献   

The Meritocratic Elite vs. the Common Man: Income Inequality in the Affluent OECD Countries

Our goal is to highlight the relationship between vested interests of the meritocratic elite and the deteriorating situation of the common man. We provide an example of rising income inequality in selected OECD countries over the past thirty years. Income inequality is growing, despite the increase in labor productivity based on technological progress, which we prove by using robust panel regression models. Our findings could be explained by the effect of “extreme meritocracy” that describes a situation in which wages for “the working rich” are growing faster than their productivity, and creating wage stagnation for the middle-class workers.     

The Uncertainty of Academic Rent and Income Inequality: The OECD Panel Evidence

The article presents an alternative view on the education—income inequality relationship, which calls into question the neoclassical claim that education increases labor productivity and hence contributes to a higher output, wage and consequently more even income distribution. In the context of public policies, education needs to be seen not only as a factor of income mobility, but also as a “positional good,” which benefits graduates at the expense of non-graduates. Education generates “academic rent,” by which we mean uneven remuneration of workers based on academic signs of distinctions that do not necessarily reflect differences in productivity. Using the robust panel model on a sample of OECD (Organization of Economic Co-operation and Development) countries from 1980 to 2015, we show that investments in human capital lead to lower inequality, but overinvestments tends to increase income inequality, which may be related to academic rent. In discussing this result, we consider that uncertainty of academic rent under the condition of a rapid transformation of the workplace caused by the fourth industrial revolution.     

Using an integrated choice and latent variable model to understand the impact of “professional” respondents in a stated preference survey

Internet panels are increasingly used for stated preference research. Because members of such panels receive compensation for each completed survey, one concern is that over time this creates professional respondents who answer surveys solely for the monetary compensation. We identify professional respondents using data on panel tenure, survey response frequency, completion rate and total number of completed surveys. We find evidence of two types of professional respondents: “hyperactives” who answer surveys frequently and “experienced” who have long panel tenure and a large number of completed surveys. Using an integrated choice and latent variable model on stated preference survey data, we find that “hyperactive” respondents are less likely to choose the 'status quo’ and have a more stochastic choice process as seen from the econometrician's point of view, whereas “experienced” respondents have a relatively more deterministic choice process. Our results show that “hyperactive” respondents significantly impact estimated values.     

Optimal sequential contract with a risk‐averse supplier

We study optimal contracts in environments where a risk‐averse supplier discovers cost information privately and gradually over time: the supplier is privately informed about its cost uncertainty at the time of contracting and discovers the realization of cost condition privately after contracting and before production. We show that both the buyer and the supplier prefer more cost uncertainty when the supplier is not very risk‐averse but less cost uncertainty when the supplier is sufficiently risk‐averse. However, the buyer always prefers to contract before the cost uncertainty resolves regardless of the supplier's degree of risk aversion. The nature of the optimal contract also depends on the supplier's risk preference. A separating contract is optimal when the supplier is not very risk‐averse; however, a pooling contract, which offers the same contract terms regardless of the cost uncertainty, can be optimal when the supplier becomes sufficiently risk‐averse. Moreover, the optimal production schedule is often characterized by “inflexible rules.”     

Two criteria for social decisions

This paper studies the ethical underpinnings of two social criteria which are prominent in the literature dealing with the problem of evaluating allocations of several consumption goods in a population with heterogenous preferences. The Pazner-Schmeidler criterion [Pazner-Schmeidler, Egalitarian equivalent allocations: a new concept of economic equity, Quart. J. Econ. 92 (1978) 671-687] and the Egalitarian Walras criterion [Fleurbaey and Maniquet, Utilitarianism versus fairness in welfare economics, in: M. Salles, J.A. Weymark (Eds.), Justice, Political Liberalism and Utilitarianism: Themes from Harsanyi and Rawls, Cambridge University Press, Cambridge, 1996, forthcoming] are prima facie quite different. But it is shown here that these criteria are related to close variants of the fairness condition that an allocation is better when every individual bundle in it dominates the average consumption in another allocation. In addition, the results suggest that the Pazner-Schmeidler criterion can be viewed as the best extension of the Walrasian criterion to non-convex economies.     

Good Jobs,Bad Jobs and Redistribution*

We analyse the question of optimal taxation in a dual economy, when the policy‐maker is concerned about the distribution of labour income. Income inequality is caused by the presence of sunk capital investments, which creates a “good jobs” sector due to the capture of quasi‐rents by trade unions. With strong unions and high planner preference for income equality, the optimal policy is a combination of investment subsidies and progressive income taxation. If unions are weaker, the policy‐maker may instead choose to tax investment.