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The Picketty Inequality in the Nash-Bargained Social Contract

Author

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  • Raul V. Fabella

    (School of Economics, University of the Philippines Diliman)

Abstract

As a proxy for a Pareto-efficient market economy, we adopt the two-party Nash Bargaining model featuring a qualitative bias in the treatment of the contributions of the parties. The Piketty inequality here is the share in total welfare accruing to the richer party over total welfare attained at agreement point. We show that this inequality can never exceed the inequality in initial contributions if the qualitative bias is zero. The rising Piketty inequality requires that the qualitative bias exceed a positive threshold. The Piketty trajectory emerges if the qualitative bias oscillates around the threshold due to changing social and economic environment.

Suggested Citation

  • Raul V. Fabella, 2014. "The Picketty Inequality in the Nash-Bargained Social Contract," UP School of Economics Discussion Papers 201413, University of the Philippines School of Economics.
    • Handle: RePEc:phs:dpaper:201413
    as

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    File URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/1467/943
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    Cited by:

    1. Estrada, Fernando, 2015. "Antinomies de Le Capital au XXIe siècle [Antinomies of Capital in the 21st Century]," MPRA Paper 61126, University Library of Munich, Germany.
    2. Estrada, Fernando, 2015. "Economía y ciencias sociales: reporte de investigación [Economics and social sciences: Technical report]," MPRA Paper 67129, University Library of Munich, Germany.

    More about this item

    Keywords

    Piketty; Inequality; Nash Bargaining;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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