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A bitter choice turned sweet: How acknowledging individuals’ concern at having a low relative income serves to align utilitarianism and egalitarianism

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  • Oded Stark

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  • Marcin Jakubek
  • Martyna Kobus

Abstract

When individuals’ utility is a convex combination of their income and their concern at having a low relative income (the weights attached to income and to the concern at having a low relative income sum up to one), the maximization of aggregate utility yields an equal income distribution. This alignment of utilitarianism and egalitarianism is obtained for any number of individuals, and for general utility functions that are convex combinations of a power function of income and the concern at having a low relative income. The alignment can also hold when the weights sum up to a number different than one. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Oded Stark & Marcin Jakubek & Martyna Kobus, 2015. "A bitter choice turned sweet: How acknowledging individuals’ concern at having a low relative income serves to align utilitarianism and egalitarianism," Journal of Evolutionary Economics, Springer, vol. 25(3), pages 541-557, July.
  • Handle: RePEc:spr:joevec:v:25:y:2015:i:3:p:541-557
    DOI: 10.1007/s00191-015-0396-6
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    References listed on IDEAS

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    1. Michael J. Boskin & Eytan Sheshinski, 1978. "Optimal Redistributive Taxation When Individual Welfare Depends upon Relative Income," The Quarterly Journal of Economics, Oxford University Press, vol. 92(4), pages 589-601.
    2. AndrewE. Clark & Claudia Senik, 2010. "Who Compares to Whom? The Anatomy of Income Comparisons in Europe," Economic Journal, Royal Economic Society, vol. 120(544), pages 573-594, May.
    3. Oded Stark & Walter Hyll, 2011. "On the Economic Architecture of the Workplace: Repercussions of Social Comparisons among Heterogeneous Workers," Journal of Labor Economics, University of Chicago Press, vol. 29(2), pages 349-375.
    4. Blanchflower, David G. & Oswald, Andrew J., 2008. "Hypertension and happiness across nations," Journal of Health Economics, Elsevier, vol. 27(2), pages 218-233, March.
    5. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 963-1002.
    6. Stark, Oded & Taylor, J Edward, 1991. "Migration Incentives, Migration Types: The Role of Relative Deprivation," Economic Journal, Royal Economic Society, vol. 101(408), pages 1163-1178, September.
    7. Wendner, Ronald & Goulder, Lawrence H., 2008. "Status effects, public goods provision, and excess burden," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 1968-1985, October.
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    9. David Andolfatto, 2002. "A Theory of Inalienable Property Rights," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 382-393, April.
    10. Stark, Oded & Taylor, J Edward, 1991. "Migration Incentives, Migration Types: The Role of Relative Deprivation," Economic Journal, Royal Economic Society, vol. 101(408), pages 1163-1178, September.
    11. Stark, Oded, 2013. "Stressful Integration," European Economic Review, Elsevier, vol. 63(C), pages 1-9.
    12. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
    13. Blomquist, N. Soren, 1993. "Interdependent behavior and the effect of taxes," Journal of Public Economics, Elsevier, vol. 51(2), pages 211-218, June.
    14. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198281931.
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    Keywords

    Utilitarianism; Egalitarianism; Social welfare maximization; Low relative income; H0; I0; I30; I31;

    JEL classification:

    • H0 - Public Economics - - General
    • I0 - Health, Education, and Welfare - - General
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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