Distribution of Wealth and Interdependent Preferences
AbstractWe 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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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3684.
Length: 18 pages
Date of creation: Sep 2008
Date of revision:
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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)
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