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Consumption rigths: a market mechanism to redistribute wealth

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  • Jorge Rivera C.
  • Francisco Martínez

Abstract

In an exchange economy with only private consumption goods we propose acompetitive mechanism to reach any income distribution. We introduce the socalled consumption rights, which is a real parameter that modifies thebudgetaryconstraint of individuals but does not participate in the utility functions.Consumption rights can be traded in the market, which is the main diferencewith slack parameters, as fiat money or tax inflation, widely known asmethods tomodify the distribution of wealth. The policy maker control variables areboththe amount of rights assigned to each individual and a pricing rule thatdefines the rate of exchange between rights and wealth. The onlyintervention of the planner will be trough the definition of the policy,because the redistribution of wealth will be the consequence of thecompetitive exchange among consumers.

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Bibliographic Info

Paper provided by University of Chile, Department of Economics in its series Working Papers with number wp215.

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Date of creation: Nov 2005
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Handle: RePEc:udc:wpaper:wp215

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Web page: http://www.econ.uchile.cl/
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Keywords: income redistribution; competitive equilibrium; consumption rights.;

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  2. AUMANN, Robert J. & DREZE, Jacques H., . "Values of markets with satiation or fixed prices," CORE Discussion Papers RP -722, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  10. Peter J. Hammond, 1999. "Equal Rights to Trade and Mediate," Working Papers 99019, Stanford University, Department of Economics.
  11. Calvo, Guillermo A & Guidotti, Pablo E, 1993. "On the Flexibility of Monetary Policy: The Case of the Optimal Inflation Tax," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 667-87, July.
  12. Kocherlakota, Narayana R., 1998. "Money Is Memory," Journal of Economic Theory, Elsevier, vol. 81(2), pages 232-251, August.
  13. Balasko, Yves, 1982. "Equilibria and efficiency in the fixprice setting," Journal of Economic Theory, Elsevier, vol. 28(1), pages 113-127, October.
  14. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
  15. Brown, Donald J., 1991. "Equilibrium analysis with non-convex technologies," Handbook of Mathematical Economics, in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 36, pages 1963-1995 Elsevier.
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