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Equity and Efficiency When Needs Differ

Author

Listed:
  • Kristoffer Berg
  • Morten Håvarstein
  • Paolo Piacquadio
  • Paolo Giovanni Piacquadio

Abstract

There is no consensus on how to measure social welfare and inequality when households have different needs. As we show, a dilemma emerges between holding households responsible for their needs or compensating them. This dilemma is of first-order importance for social welfare, but generally plays a minor role in the measurement of inequality. To address this impasse, we introduce partial compensation. Our axiomatic characterizations reveal novel families of welfare criteria and, with the extension to multidimensional commodity spaces, provide ready-to-use criteria for the analysis of redistributive policies.

Suggested Citation

  • Kristoffer Berg & Morten Håvarstein & Paolo Piacquadio & Paolo Giovanni Piacquadio, 2024. "Equity and Efficiency When Needs Differ," CESifo Working Paper Series 11310, CESifo.
    • Handle: RePEc:ces:ceswps:_11310
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    References listed on IDEAS

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    1. repec:bla:revinw:v:44:y:1998:i:4:p:565-69 is not listed on IDEAS
    2. Aaberge, Rolf & Bhuller, Manudeep & Langørgen, Audun & Mogstad, Magne, 2010. "The distributional impact of public services when needs differ," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 549-562, October.
    3. Rolf Aaberge & Audun Langørgen & Magne Mogstad & Marit Østensen, 2008. "The Impact of Local Public Services and Geographical Cost of Living Differences on Poverty Estimates," Discussion Papers 551, Statistics Norway, Research Department.
    4. Rolf Aaberge & Ingrid Melby, 1998. "The Sensitivity Of Income Inequality To Choice Of Equivalence Scales," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(4), pages 565-569, December.
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    More about this item

    Keywords

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    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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