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Income redistribution going awry: The reversal power of the concern for relative deprivation

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  • Sorger, Gerhard
  • Stark, Oded

Abstract

We demonstrate that a rank-preserving transfer from a richer individual to a poorer individual can exacerbate income inequality (when inequality is measured by the Gini coefficient). This happens when individuals’ preferences depend negatively not only on work time (effort) but also on low relative income. It is rigorously shown that the set of preference profiles that gives rise to this perverse effect of a transfer on inequality is a non-empty open subset of all preference profiles. A robust example illustrates this result.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 86 (2013)
Issue (Month): C ()
Pages: 1-9

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Handle: RePEc:eee:jeborg:v:86:y:2013:i:c:p:1-9

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Web page: http://www.elsevier.com/locate/jebo

Related research

Keywords: A rank-preserving inequality-narrowing transfer; The Gini coefficient; Low relative income; Relative deprivation; Exacerbated inequality;

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References

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Cited by:
  1. Stark, Oded & Jakubek, Marcin & Falniowski, Fryderyk, 2014. "Reconciling the Rawlsian and the utilitarian approaches to the maximization of social welfare," Economics Letters, Elsevier, vol. 122(3), pages 439-444.
  2. Stark, Oded, 2014. "On the economics of others," Discussion Papers 164965, University of Bonn, Center for Development Research (ZEF).

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