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A fair solution to the compensation problem

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  • VALLETTA, Giacomo

    (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

Abstract

We study equity in economies where agents are endowed with different, non transferable, personal talents. To compensate them for such differences a given amount of money needs to be shared among them. We axiomatize a family of social orderings over allocations based on efficiency, fairness and robustness properties. Taking into account incentive constraints we derive the optimal policy: individuals with the same talent need to be equally compensated and only people whose level of talent is below a certain threshold should receive a positive compensation.

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File URL: http://www.uclouvain.be/cps/ucl/doc/core/documents/coredp2007_77.pdf
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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2007077.

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Date of creation: 01 Sep 2007
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Handle: RePEc:cor:louvco:2007077

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Related research

Keywords: compensation; talents; fairness; axioms; social orderings; incentive- compatibility;

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References

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  1. FLEURBAEY, Marc & MANIQUET, François, . "Fair social orderings when agents have unequal production skills," CORE Discussion Papers RP -1805, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Francois Maniquet & Yves Sprumont, 2002. "Welfare Egalitarianism in Non-Rival Environments," Economics Working Papers 0016, Institute for Advanced Study, School of Social Science.
  3. Marc Fleurbaey & François Maniquet, 2006. "Compensation and responsibility," Working Papers halshs-00121367, HAL.
  4. Marc Fleurbaey & Francois Maniquet, 2002. "Fair Income Tax," Economics Working Papers 0021, Institute for Advanced Study, School of Social Science.
  5. Roland Iwan Luttens & Erwon Ooghe, 2004. "Is it fair to "make work pay"??," Center for Economic Studies - Discussion papers ces0410, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  6. M. Fleurbaey & F. Maniquet, 2008. "Fair social orderings," Economic Theory, Springer, vol. 34(1), pages 25-45, January.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Leitura do dia
    by Erik Figueiredo in Moral Hazard on 2011-03-25 18:09:00
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Cited by:
  1. Valletta Giacomo, 2012. "Health, Fairness and Taxation," Research Memorandum 017, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  2. CALO-BLANCO, Aitor, 2012. "The compensation problem with fresh starts," CORE Discussion Papers 2012036, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. CALO-BLANCO, Aitor, 2012. "Responsibility, freedom, and forgiveness in health care," CORE Discussion Papers 2012004, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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