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A fair solution to the compensation problem

Listed author(s):
  • Giacomo Valletta

    ()

We study equity in economies where agents are endowed with different, non transferable, personal talents. To compensate them for such differences a given amount of money needs to be shared among them. We axiomatize a family of social orderings over allocations based on efficiency, fairness and robustness properties. Taking into account incentive constraints we derive the optimal policy: individuals with the same talent need to be equally compensated and only people whose level of talent is below a certain threshold should receive a positive compensation.

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File URL: http://hdl.handle.net/10.1007/s00355-008-0335-7
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Article provided by Springer & The Society for Social Choice and Welfare in its journal Social Choice and Welfare.

Volume (Year): 32 (2009)
Issue (Month): 3 (March)
Pages: 455-478

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Handle: RePEc:spr:sochwe:v:32:y:2009:i:3:p:455-478
DOI: 10.1007/s00355-008-0335-7
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Order Information: Web: http://www.springer.com/economics/economic+theory/journal/355

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  1. Marc Fleurbaey & François Maniquet, 2006. "Fair Income Tax," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 55-83.
  2. FLEURBAEY, Marc & MANIQUET, François, "undated". "Compensation and responsibility," CORE Discussion Papers RP 2284, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Roland Iwan Luttens & Erwin Ooghe, 2007. "Is it Fair to 'Make Work Pay'?," Economica, London School of Economics and Political Science, vol. 74(296), pages 599-626, November.
  4. M. Fleurbaey & F. Maniquet, 2008. "Fair social orderings," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 34(1), pages 25-45, January.
  5. Maniquet, Francois & Sprumont, Yves, 2005. "Welfare egalitarianism in non-rival environments," Journal of Economic Theory, Elsevier, vol. 120(2), pages 155-174, February.
  6. François Maniquet & Yves Sprumont, 2004. "Fair Production and Allocation of an Excludable Nonrival Good," Econometrica, Econometric Society, vol. 72(2), pages 627-640, 03.
  7. Marc Fleurbaey & François Maniquet, 2005. "Fair social orderings when agents have unequal production skills," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 24(1), pages 93-127, 09.
  8. Thomson, W., 1996. "Consistent Allocation Rules," RCER Working Papers 418, University of Rochester - Center for Economic Research (RCER).
  9. Marc Fleurbaey & Maurice Salles & John Weymark, 2008. "Justice, Political Liberalism and Utilitarianism," Post-Print hal-00246415, HAL.
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