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Inequality and fairness

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  • Christopher Phelan
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    Abstract

    This study uses John Rawls' behind-the-veil of ignorance device as a fairness criterion to evaluate social policies and applies it to a contracting model in which the terms equality of opportunity and equality of result are well defined. The results suggest that fairness and inequality-even extreme inequality-are compatible. In a static world, when incentives must be provided, fairness implies equality of opportunity, but inequality of result. In a dynamic world of long-lived individuals, fairness implies not only inequality of result, but also, eventually, infinite inequality of result. If each period of the dynamic model is interpreted as a generation, then eventual infinite inequality holds for opportunity as well, as long as fairness is from the perspective of the first generation. If preferences of later generations are taken into account, then inequality of opportunity still occurs, although not at extreme levels.

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    Bibliographic Info

    Article provided by Federal Reserve Bank of Minneapolis in its journal Quarterly Review.

    Volume (Year): (2002)
    Issue (Month): Spr ()
    Pages:

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    Handle: RePEc:fip:fedmqr:y:2002:i:spr:n:v.26no.2:x:1

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    Related research

    Keywords: Econometric models;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Phelan, Christopher & Townsend, Robert M, 1991. "Computing Multi-period, Information-Constrained Optima," Review of Economic Studies, Wiley Blackwell, vol. 58(5), pages 853-81, October.
    2. Andrew Atkeson & Robert E Lucas, 2010. "On Efficient Distribution with Private Information," Levine's Working Paper Archive 2179, David K. Levine.
    3. Phelan, Christopher, 1994. "Incentives and Aggregate Shocks," Review of Economic Studies, Wiley Blackwell, vol. 61(4), pages 681-700, October.
    4. Andrew Caplin & John Leahy, 2001. "The social discount rate," Discussion Paper / Institute for Empirical Macroeconomics 137, Federal Reserve Bank of Minneapolis.
    5. Thomas, Jonathan & Worrall, Tim, 1990. "Income fluctuation and asymmetric information: An example of a repeated principal-agent problem," Journal of Economic Theory, Elsevier, vol. 51(2), pages 367-390, August.
    6. Spear, Stephen E & Srivastava, Sanjay, 1987. "On Repeated Moral Hazard with Discounting," Review of Economic Studies, Wiley Blackwell, vol. 54(4), pages 599-617, October.
    7. Rogerson, William P, 1985. "Repeated Moral Hazard," Econometrica, Econometric Society, vol. 53(1), pages 69-76, January.
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. What is Fair?
      by Josh in The Everyday Economist on 2014-04-07 19:13:09
    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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    Cited by:
    1. Juan M. Sánchez, 2003. "Universitary Financing and Welfare: A Dynamic Analysis with Heterogeneous Agents and Overlapping Generations," Department of Economics, Working Papers 047, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
    2. Christopher Phelan, 2005. "Opportunity and social mobility," Staff Report 323, Federal Reserve Bank of Minneapolis.
    3. Christopher Phelan, 2003. "Opportunity and Social Mobility," Levine's Bibliography 666156000000000379, UCLA Department of Economics.

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