The Impossibility of a Just Pigouvian
AbstractAn income inequality measure satisfies the Pigou-Dalton transfer principle if progressive transfers decrease income inequality. When transfers cause transaction costs, one can trace out the maximum leakage such that the transfer pays at the margin. An income inequality measure is leaky-bucket consistent if the transaction costs of a transfer are neither negative nor do the exceed the amount of the transfer. We show that the Pigou-Dalton transfer principle and leaky-bucket consistency are not reconcilable. Experimental research has shown that subjects’ behavior exhibit graded compensating justice, that is compensating income changes which maintain the degree of income inequality and point in the same direction should provide less income compensation for richer than for poorer income recipients. We show also that the Pigou-Dalton transfer principle and graded compensating justice are not reconcilable.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by ECINEQ, Society for the Study of Economic Inequality in its series Working Papers with number 69.
Length: 15 pages
Date of creation: 2007
Date of revision:
Income distribution; Intermediate inequality indices; Unit-consistency;
Other versions of this item:
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
This paper has been announced in the following NEP Reports:
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.:
- Christian Seidl, 2001. "Inequality measurement and the leaky-bucket paradox," Economics Bulletin, AccessEcon, vol. 4(6), pages 1-7.
- Ballano, Carlos & Ruiz-Castillo, Javier, 1993. "Searching by questionnaire for the meaning of income inequality," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/4773, Universidad Carlos III de Madrid.
- Río, Coral del & Ruiz-Castillo, Javier, 2000.
"Intermediate inequality and welfare,"
Open Access publications from Universidad Carlos III de Madrid
info:hdl:10016/4760, Universidad Carlos III de Madrid.
- Bossert, Walter & Pfingsten, Andreas, 1990. "Intermediate inequality: concepts, indices, and welfare implications," Mathematical Social Sciences, Elsevier, vol. 19(2), pages 117-134, April.
- Peter Lambert & Giuseppe Lanza, 2006. "The effect on inequality of changing one or two incomes," Journal of Economic Inequality, Springer, vol. 4(3), pages 253-277, December.
- Eva Camacho-Cuena & Tibor Neugebauer & Christian Seidl, 2007. "Leaky Buckets Versus Compensating Justice: An Experimental Investigation," Working Papers 74, ECINEQ, Society for the Study of Economic Inequality.
- Kolm, Serge-Christophe, 1976. "Unequal inequalities. II," Journal of Economic Theory, Elsevier, vol. 13(1), pages 82-111, August.
- Kolm, Serge-Christophe, 1976. "Unequal inequalities. I," Journal of Economic Theory, Elsevier, vol. 12(3), pages 416-442, June.
- Harrison, Elizabeth & Seidl, Christian, 1994. " Perceptional Inequality and Preferential Judgements: An Empirical Examination of Distributional Axioms," Public Choice, Springer, vol. 79(1-2), pages 61-81, April.
- Blackorby, Charles & Donaldson, David, 1978. "Measures of relative equality and their meaning in terms of social welfare," Journal of Economic Theory, Elsevier, vol. 18(1), pages 59-80, June.
- Dagum, Camilo, 1990. "On the relationship between income inequality measures and social welfare functions," Journal of Econometrics, Elsevier, vol. 43(1-2), pages 91-102.
- Amiel, Yoram & Cowell, Frank A., 1992. "Measurement of income inequality : Experimental test by questionnaire," Journal of Public Economics, Elsevier, vol. 47(1), pages 3-26, February.
- Buhong Zheng, 2007. "Unit-Consistent Decomposable Inequality Measures," Economica, London School of Economics and Political Science, vol. 74(293), pages 97-111, 02.
- Traub, Stefan & Seidl, Christian & Schmidt, Ulrich, 2009. "An experimental study on individual choice, social welfare, and social preferences," European Economic Review, Elsevier, vol. 53(4), pages 385-400, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maria Ana Lugo).
If references are entirely missing, you can add them using this form.