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A multi-factor inequality approach to a transfer scheme: the case of Common Agricultural Policy

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  • A. Palestini
  • G. Pignataro

Abstract

The purpose of this paper is to propose theoretical foundations on the impact of transfer scheme, e.g. Community Agricultural Policy, on income inequality within European Countries. First, we show that ex-post inequality (in the after-transfer distribution) may increase if either initial aggregate income or the amount of fiscal contributions are sufficiently high. Second according to welfare ordering, we characterize a multi-factor decomposition of the Atkinson index to gauge the impact of each income source on the inequality profile. Third, we introduce a methodology to construct a cooperative game played by different income factors (as net incomes and/or incoming transfers) explicitly measuring the cost of inequality across the population in terms of welfare loss. We finally rely on Banzhaf and Shapley values to determine the marginal contributions of each factor to overall inequality.

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number wp891.

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Date of creation: Jul 2013
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Handle: RePEc:bol:bodewp:wp891

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  1. Paul Allanson, 2006. "On the characterisation and measurement of the redistributive effects of agricultural policy," Dundee Discussion Papers in Economics, Economic Studies, University of Dundee 188, Economic Studies, University of Dundee.
  2. Le Breton, Michel & Montero, Maria & Zaporozhets, Vera, 2012. "Voting power in the EU council of ministers and fair decision making in distributive politics," Mathematical Social Sciences, Elsevier, Elsevier, vol. 63(2), pages 159-173.
  3. Charles Blackorby & David Donaldson & Maria Auersperg, 1981. "A New Procedure for the Measurement of Inequality within and among Population Subgroups," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 14(4), pages 665-85, November.
  4. Arthur Charpentier & Stéphane Mussard, 2011. "Income inequality games," Journal of Economic Inequality, Springer, Springer, vol. 9(4), pages 529-554, December.
  5. Giuseppe Pignataro, 2010. "Measuring equality of opportunity by Shapley value," Economics Bulletin, AccessEcon, vol. 30(1), pages 786-798.
  6. Frédéric CHANTREUIL & Alain TRANNOY, 2011. "Inequality Decomposition Values," Annales d'Economie et de Statistique, ENSAE, issue 101-102, pages 13-36.
  7. Mary Keeney, 2000. "The Distributional Impact of Direct Payments on Irish Farm Incomes," Journal of Agricultural Economics, Wiley Blackwell, Wiley Blackwell, vol. 51(2), pages 252-265.
  8. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, Elsevier, vol. 2(3), pages 244-263, September.
  9. Jeroen Kuipers & Ulrich Faigle & Walter Kern, 2001. "On the computation of the nucleolus of a cooperative game," International Journal of Game Theory, Springer, Springer, vol. 30(1), pages 79-98.
  10. Heiko Hansen & Ramona Teuber, 2011. "Assessing the impacts of EU's common agricultural policy on regional convergence: sub-national evidence from Germany," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 43(26), pages 3755-3765.
  11. Shorrocks, Anthony F, 1984. "Inequality Decomposition by Population Subgroups," Econometrica, Econometric Society, Econometric Society, vol. 52(6), pages 1369-85, November.
  12. Paul Allanson, 2006. "The Redistributive Effects of Agricultural Policy on Scottish Farm Incomes," Journal of Agricultural Economics, Wiley Blackwell, Wiley Blackwell, vol. 57(1), pages 117-128, 03.
  13. Matthew Gorton & Carmen Hubbard & Lionel Hubbard, 2009. "The Folly of European Union Policy Transfer: Why the Common Agricultural Policy (CAP) Does Not Fit Central and Eastern Europe," Regional Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 43(10), pages 1305-1317, December.
  14. Barr, Jason & Passarelli, Francesco, 2009. "Who has the power in the EU?," Mathematical Social Sciences, Elsevier, Elsevier, vol. 57(3), pages 339-366, May.
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