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Partial compensation/responsibility

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  • Erwin OOGHE
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    Abstract

    Compensation/responsibility theory requires that differences in individual outcomes which can be fully attributed to differences in underlying ‘compensation’ factors should be eliminated, while differences in outcomes caused by differential ‘responsibility’ factors should be preserved. To implement the theory, a ‘sharp’ cut between compensation and responsibility factors has to be made, which is often difficult in practice. In this note, we introduce a more .flexible ‘soft’ cut. - Based on a notion of partial compensation/responsibility - into a first-best income tax model à la Bossert (1995) and Bossert and Fleurbaey (1996). Two results emerge. First, we show that this ‘soft’ cut does not allow to escape the Bossert-Fleurbaey separability requirement of the gross income function. Second, we characterize a partial sharing rule-cum-separability as a natural candidate for partial redistribution.

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    File URL: http://www.econ.kuleuven.be/eng/ew/discussionpapers/Dps10/Dps1021.pdf
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    Bibliographic Info

    Paper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces10.21.

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    Date of creation: Jul 2010
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    Handle: RePEc:ete:ceswps:ces10.21

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