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Optimal Income Distribution Rules and Representative Consumers

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  • Jerison, Michael

Abstract

This paper derives observable properties of economies with optimal income distribution rules that specify consumers' incomes as functions of aggregate income and prices. Optimality implies that the aggregate demand function is generated by a single 'representative' consumer. The author derives an additional implication which, when consumers receive fixed shares of aggregate income, requires that the consumers' demands become more dispersed when aggregate income rises. This last condition has empirical support. The results relate the representative consumer's preferences to a version of Kaldor's compensation criterion and show when both can be used for normative analysis without internal inconsistency. Copyright 1994 by The Review of Economic Studies Limited.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of Economic Studies.

Volume (Year): 61 (1994)
Issue (Month): 4 (October)
Pages: 739-71

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Handle: RePEc:bla:restud:v:61:y:1994:i:4:p:739-71

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Cited by:
  1. Emanuela Randon, 2002. "L’analisi positiva dell’esternalità: rassegna della letteratura e nuovi spunti," Working Papers 58, University of Milano-Bicocca, Department of Economics, revised Jun 2002.
  2. Michael Jerison, 1998. "Dispersed Excess Demands, the Weak Axiom and Uniqueness of Equilibrium," Discussion Papers 98-03, University at Albany, SUNY, Department of Economics.
  3. Laurens CHERCHYE & Ian CRAWFORD & Bram DE ROCK & Frederic VERMEULEN, 2011. "Aggregation without the aggravation? Nonparametric analysis of the representative consumer," Center for Economic Studies - Discussion papers ces11.36, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  4. Michael Jerison, 2001. "Demand Dispersion, Metonymy and Ideal Panel Data," Discussion Papers 01-11, University at Albany, SUNY, Department of Economics.
  5. Mattei, Aurelio, 2000. "Full-scale real tests of consumer behavior using experimental data," Journal of Economic Behavior & Organization, Elsevier, vol. 43(4), pages 487-497, December.
  6. Chambers, Christopher P., . "Inequality aversion and risk aversion," Working Papers 1300, California Institute of Technology, Division of the Humanities and Social Sciences.
  7. David Jerison & Michael Jerison, 2001. "Real Income Growth And Revealed Preference Inconsistency," Economics Working Papers we012902, Universidad Carlos III, Departamento de Economía.
  8. Maria Concetta Chiuri, 1999. "Individual Decisions and Household Demand for Consumption And Leisure," CSEF Working Papers 26, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.

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