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A fair solution to the compensation problem

  • VALLETTA, Giacomo

    (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

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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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2007077.

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Date of creation: 01 Sep 2007
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Handle: RePEc:cor:louvco:2007077
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  1. Marc Fleurbaey & François Maniquet, 2005. "Fair social orderings when agents have unequal production skills," Social Choice and Welfare, Springer, vol. 24(1), pages 93-127, 09.
  2. M. Fleurbaey & F. Maniquet, 2008. "Fair social orderings," Economic Theory, Springer, vol. 34(1), pages 25-45, January.
  3. Marc Fleurbaey & Fran�ois Maniquet, 2006. "Fair Income Tax," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 55-83.
  4. Marc Fleurbaey & François Maniquet, 2006. "Compensation and responsibility," Working Papers halshs-00121367, HAL.
  5. MANIQUET, François & SPRUMONT, Yves, . "Welfare egalitarianism in non-rival environments," CORE Discussion Papers RP -1826, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. 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.
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