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A multi-factor inequality approach to a transfer scheme: the case of Common Agricultural Policy

  • A. Palestini
  • G. Pignataro

The purpose of this paper is to propose theoretical foundations on the impact of transfer scheme, e.g. Community Agricultural Policy, on income inequality within European Countries. First, we show that ex-post inequality (in the after-transfer distribution) may increase if either initial aggregate income or the amount of fiscal contributions are sufficiently high. Second according to welfare ordering, we characterize a multi-factor decomposition of the Atkinson index to gauge the impact of each income source on the inequality profile. Third, we introduce a methodology to construct a cooperative game played by different income factors (as net incomes and/or incoming transfers) explicitly measuring the cost of inequality across the population in terms of welfare loss. We finally rely on Banzhaf and Shapley values to determine the marginal contributions of each factor to overall inequality.

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number wp891.

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Date of creation: Jul 2013
Date of revision:
Handle: RePEc:bol:bodewp:wp891
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  1. Arthur Charpentier & Stephane Mussard, 2010. "Income Inequality Games," Cahiers de recherche 10-03, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
  2. Michel Le Breton & Maria Montero & Vera Zaporozhets, 2011. "Voting Power in the EU Council of Ministers and Fair Decision Making in Distributive Politics," Discussion Papers 2011-03, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  3. Frédéric CHANTREUIL & Alain TRANNOY, 2011. "Inequality Decomposition Values," Annals of Economics and Statistics, GENES, issue 101-102, pages 13-36.
  4. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
  5. Charles Blackorby & David Donaldson & Maria Auersperg, 1981. "A New Procedure for the Measurement of Inequality within and among Population Subgroups," Canadian Journal of Economics, Canadian Economics Association, vol. 14(4), pages 665-85, November.
  6. Paul Allanson, 2008. "On the Characterisation and Measurement of the Redistributive Effect of Agricultural Policy," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(1), pages 169-187, 02.
  7. Paul Allanson, 2006. "The Redistributive Effects of Agricultural Policy on Scottish Farm Incomes," Journal of Agricultural Economics, Wiley Blackwell, vol. 57(1), pages 117-128, 03.
  8. Heiko Hansen & Ramona Teuber, 2011. "Assessing the impacts of EU's common agricultural policy on regional convergence: sub-national evidence from Germany," Applied Economics, Taylor & Francis Journals, vol. 43(26), pages 3755-3765.
  9. Jason Barr & Francesco Passarelli, . "Who Has the Power in the EU?," Working Papers Rutgers University, Newark 2004-005, Department of Economics, Rutgers University, Newark.
  10. Jeroen Kuipers & Ulrich Faigle & Walter Kern, 2001. "On the computation of the nucleolus of a cooperative game," International Journal of Game Theory, Springer, vol. 30(1), pages 79-98.
  11. Giuseppe Pignataro, 2010. "Measuring equality of opportunity by Shapley value," Economics Bulletin, AccessEcon, vol. 30(1), pages 786-798.
  12. Mary Keeney, 2000. "The Distributional Impact of Direct Payments on Irish Farm Incomes," Journal of Agricultural Economics, Wiley Blackwell, vol. 51(2), pages 252-265.
  13. Shorrocks, Anthony F, 1984. "Inequality Decomposition by Population Subgroups," Econometrica, Econometric Society, vol. 52(6), pages 1369-85, November.
  14. Matthew Gorton & Carmen Hubbard & Lionel Hubbard, 2009. "The Folly of European Union Policy Transfer: Why the Common Agricultural Policy (CAP) Does Not Fit Central and Eastern Europe," Regional Studies, Taylor & Francis Journals, vol. 43(10), pages 1305-1317, December.
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