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A fair solution to the compensation problem

  • 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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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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  1. FLEURBAEY, Marc & MANIQUET, François, . "Compensation and responsibility," CORE Discussion Papers RP 2284, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Francois Maniquet & Yves Sprumont, 2002. "Welfare Egalitarianism in Non-Rival Environments," Economics Working Papers 0016, Institute for Advanced Study, School of Social Science.
  3. Marc Fleurbaey & François Maniquet, 2006. "Fair income tax," Post-Print hal-00246842, HAL.
  4. Thomson, W., 1996. "Consistent Allocation Rules," RCER Working Papers 418, University of Rochester - Center for Economic Research (RCER).
  5. R. I. Luttens & E. Ooghe, 2005. "Is it fair to “make work pay”?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 05/283, Ghent University, Faculty of Economics and Business Administration.
  6. Marc Fleurbaey & François Maniquet, 2008. "Fair social orderings," Post-Print hal-00246525, HAL.
  7. FLEURBAEY, Marc & MANIQUET, François, . "Fair social orderings when agents have unequal production skills," CORE Discussion Papers RP 1805, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Marc Fleurbaey & Maurice Salles & John Weymark, 2008. "Justice, Political Liberalism and Utilitarianism," Post-Print hal-00246415, HAL.
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