Toshihiro Ihori (Faculty of Economics, University of Tokyo.)
Abstract
This paper develops simple models of public transfers. The sources of income inequality are differences in ability and in luck. The government employs a redistribution policy due to altruistic motives in the case of ability differences. We consider the case there the government reoptimizes income inequality is differences in luck, the economy creates a mutual insurance or provides public goods due to risk sharing motives. We derive a paradoxical result that a more able individual would not enjoy higher welfare than a less able individual. We also investigate how public transfers react to increases in income level and income inequality.
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Publisher Info
Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number
CIRJE-F-18.
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