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Do redistributive schemes reduce inequality between individuals?

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  • Eugenio Peluso

    ()
    (Dipartimento di Scienze economiche (Università di Verona))

  • Alain Trannoy

    ()
    (EHESS, GREQAM-IDEP)

Abstract

Redistribution schemes (taxes or benefits) are generally performed at the household level. The issue is to know whether intra-household inequality magnifies or hampers the redistributive effect of the transfers, when the policy-maker focuses on the inequality at the individual level. Depending on the type of the transfer, three properties capturing the idea that the more wealthy the household is, the more unequally it behaves, have been shown to matter. In the moving away approach, the deviation with the equal split make a difference, in the star-shaped approach, the average share counts while the marginal share is relevant for concavity. We complete the analysis by showing how these properties of the intra-household allocation may be recovered through a bargaining model of the household. Then, the DARA and DRRA properties of the utility function emerge as the key conditions for the recovery.

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Bibliographic Info

Paper provided by University of Verona, Department of Economics in its series Working Papers with number 26.

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Length: 18
Date of creation: Sep 2005
Date of revision:
Handle: RePEc:ver:wpaper:26

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Related research

Keywords: Inequality; Intra-household Allocation; Household bargaining; Lorenz curve; Taxation schemes.;

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  1. Kanbur, Ravi & Haddad, Lawrence, 1994. "Are Better Off Households More Unequal or Less Unequal?," Oxford Economic Papers, Oxford University Press, vol. 46(3), pages 445-58, July.
  2. Ravallion, Martin, 2001. "Growth, Inequality and Poverty: Looking Beyond Averages," World Development, Elsevier, vol. 29(11), pages 1803-1815, November.
  3. Eichhorn, Wolfgang & Funke, Helmut & Richter, Wolfram F., 1984. "Tax progression and inequality of income distribution," Journal of Mathematical Economics, Elsevier, vol. 13(2), pages 127-131, October.
  4. Haddad, L. & Kanbur, R., 1989. "How Serious Is The Neglectof Intra-Household Inequality?," Papers 450, Stockholm - International Economic Studies.
  5. Eugenio Peluso & Alain Trannoy, 2004. "Does less inequality among households mean less inequality among individuals ?," THEMA Working Papers 2004-11, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  6. Helen Couprie & Eugenio Peluso & Alain Trannoy, 2005. "From household to individual’s welfare: does the Lorenz criteria still hold? Theory and Evidence from French Data," Department of Economics University of Siena 469, Department of Economics, University of Siena.
  7. Roth, Alvin E & Rothblum, Uriel G, 1982. "Risk Aversion and Nash's Solution for Bargaining Games with Risky Outcomes," Econometrica, Econometric Society, vol. 50(3), pages 639-47, May.
  8. Yaari, Menahem E, 1977. "A Note on Separability and Quasiconcavity," Econometrica, Econometric Society, vol. 45(5), pages 1183-86, July.
  9. Dollar, David & Kraay, Aart, 2001. "Growth is good for the poor," Policy Research Working Paper Series 2587, The World Bank.
  10. Moyes, Patrick, 1989. "Some classes of functions that preserve the inequality and welfare orderings of income distributions," Journal of Economic Theory, Elsevier, vol. 49(2), pages 347-359, December.
  11. Le Breton, Michel & Moyes, Patrick & Trannoy, Alain, 1996. "Inequality Reducing Properties of Composite Taxation," Journal of Economic Theory, Elsevier, vol. 69(1), pages 71-103, April.
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