Distribution of Wealth and Interdependent Preferences

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Distribution of Wealth and Interdependent Preferences

Author Info

Grodner, Andrew () (East Carolina University)
Kniesner, Thomas J. () (Syracuse University)

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Abstract

We examine the socially optimal wealth distribution in a two-person two-good model with heterogeneous workers and asymmetric social interactions where only one (social) individual derives positive or negative utility from the leisure of the other (non-social) individual. We show that the interdependence can effectively counter-act the need to transfer wealth to low-wage individuals and may require them to be poorer by all objective measures. We demonstrate that in the presence of social interactions it can be socially desirable to keep substantial wealth inequality.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3684.

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Length: 18 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:iza:izadps:dp3684

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Find related papers by JEL classification:
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:

NEP-ALL-2008-09-29 (All new papers)
NEP-LAB-2008-09-29 (Labour Economics)
NEP-SOC-2008-09-29 (Social Norms & Social Capital)
NEP-UPT-2008-09-29 (Utility Models & Prospect Theory)

References listed on IDEAS
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.:

Peter Kooreman & Lambert Schoonbeek, 2004. "Characterizing Pareto Improvements
in an Interdependent Demand System," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(3), pages 427-443, 08. [Downloadable!] (restricted)
Kreider, Brent, 2003. "Income Uncertainty and Optimal Redistribution," Staff General Research Papers 10227, Iowa State University, Department of Economics.
Other versions:
- Brent Kreider, 2003. "Income Uncertainty and Optimal Redistribution," Southern Economic Journal, Southern Economic Association, vol. 69(3), pages 718-725, January.
Mariacristina Nardi, 2004. "Wealth Inequality and Intergenerational Links," Review of Economic Studies, Blackwell Publishing, vol. 71, pages 743-768, 07. [Downloadable!] (restricted)
Other versions:
- Mariacristina De Nardi, 2002. "Wealth inequality and intergenerational links," Staff Report 314, Federal Reserve Bank of Minneapolis. [Downloadable!]
- Mariacristina deNardi, 2000. "Wealth Inequality and Intergenerational Links," Econometric Society World Congress 2000 Contributed Papers 0547, Econometric Society. [Downloadable!]
Alberto Alesina & Eliana La Ferrara, 2001. "Preferences for Redistribution in the Land of Opportunities," Harvard Institute of Economic Research Working Papers 1936, Harvard - Institute of Economic Research. [Downloadable!]
Other versions:
- Alberto Alesina & Eliana La Ferrara, 2001. "Preferences for Redistribution in the Land of Opportunities," NBER Working Papers 8267, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- Alberto Alesina & Eliana La Ferrara, . "Preferences for Redistribution in the Land of Opportunities," Working Papers 178, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
- Alesina, Alberto & La Ferrara, Eliana, 2005. "Preferences for redistribution in the land of opportunities," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 897-931, June. [Downloadable!] (restricted)
Brock, William A & Durlauf, Steven N, 2001. "Discrete Choice with Social Interactions," Review of Economic Studies, Blackwell Publishing, vol. 68(2), pages 235-60, April.
Andrew Grodner & Thomas J. Kniesner, 2006. "Social Interactions in Labor Supply," Journal of the European Economic Association, MIT Press, vol. 4(6), pages 1226-1248, December. [Downloadable!] (restricted)

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