000264176 001__ 264176
000264176 005__ 20180810194945.0
000264176 037__ $$a1546-2017-5244
000264176 041__ $$aeng
000264176 084__ $$aD30; D31; D60; D63; H21; I38
000264176 245__ $$aAn adverse social welfare consequence of a rich-to-poor income transfer: A relative deprivation approach
000264176 260__ $$c2017
000264176 269__ $$a2017-09-29
000264176 300__ $$a38
000264176 336__ $$aWorking or Discussion Paper
000264176 490__ $$aISSN: 1436-9931
000264176 520__ $$aA transfer from a richer individual to a poorer one seems to be the most intuitive and straightforward way of reducing income inequality in a society. However, can such a transfer reduce the welfare of the society? We show that a rich-to-poor transfer can induce a response in the individuals’ behaviors which actually exacerbates, rather than reduces, income inequality as measured by the Gini index. We use this result as an input in assessing the social welfare consequence of the transfer. Measuring social welfare by Sen’s social welfare function, we show that the transfer reduces social welfare. These two results are possible even for individuals whose utility functions are relatively simple (namely, at most quadratic in all terms) and incorporate a distaste for low relative income. We first present the two results for a population of two individuals. We subsequently provide several generalizations. We show that our argument holds for a population of any size, and that the choice of utility functions which trigger this response is not singular - the results obtain for an open set of the space of admissible utility functions. In addition, we show that a rich-to-poor transfer can exacerbate inequality when we employ Lorenz-domination, and that it can decrease social welfare when we draw on any increasing, Schur-concave welfare function.
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000264176 546__ $$aEnglish
000264176 650__ $$aPublic Economics
000264176 6531_ $$aA rich-to-poor transfer; Relative income; Sen’s social welfare function
000264176 700__ $$aStark, Oded
000264176 700__ $$aKosiorowski, Grzegorz
000264176 700__ $$aJakubek, Marcin
000264176 8560_ $$fsantonini@uni-bonn.de
000264176 8564_ $$s1190428$$uhttp://ageconsearch.umn.edu/record/264176/files/DP%20244.pdf
000264176 8564_ $$s2040487$$uhttp://ageconsearch.umn.edu/record/264176/files/DP%20244.pdf?subformat=pdfa$$xpdfa
000264176 909CO $$ooai:ageconsearch.umn.edu:264176$$pGLOBAL_SET
000264176 980__ $$a1546