We investigate the conditions under which an inequality averse and additively separable welfarist constitution maker would always choose to set up a progressive equalization payments scheme in a federation with local public goods. A progressive equalization payments scheme is defined as a list of per capita net (possibly negative) subsidies - one such net subsidy for every jurisdiction - that are decreasing with respect to jurisdictions per capita wealth. We examine these questions in a setting in which the case for progressivity is a priori the strongest, namely, all citizens have the same utility function for the private and the public goods, inhabitants of a given jurisdiction are all identical, and they are not able to move across jurisdictions. We show that the constitution maker favors a progressive equalization payments scheme for all distributions of wealth and all population sizes if and only if its objective function is additively separable between each jurisdiction’s per capita wealth and number of inhabitants. When interpreted as a mean of order r social welfare function, this condition is shown to be equivalent to additive separability of the individual’s indirect utility function with respect to wealth and the price of the public good. Some implications of this restriction to the case where the individual’s direct utility function is additively separable are also derived.
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Paper provided by Universite de Montreal, Departement de sciences economiques in its series Cahiers de recherche with number
2004-12.
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.:
Blackorby, Charles & Bossert, Walter & Donaldson, David, 2002.
"Utilitarianism and the theory of justice,"
Handbook of Social Choice and Welfare,
in: K. J. Arrow & A. K. Sen & K. Suzumura (ed.), Handbook of Social Choice and Welfare, edition 1, volume 1, chapter 11, pages 543-596
Elsevier.
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