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Equity and efficiency in an overlapping generation model

Author

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  • ISAAC, Tanguy

    () (Université catholique de Louvain, CORE, Belgium)

  • PIACQUADIO, Paolo Giovanni

    () (Université catholique de Louvain, CORE, Belgium; Aix-Marseille University, AMSE, France)

Abstract

The paper addresses intergenerational and intragenerational equity in an overlapping generation economy. We aim at defining an egalitarian distribution of a constant stream of resources, when preferences are ordinal and non-comparable. We establish the impossibility of efficiently distributing resources while treating equally agents with same preferences that belong to possibly different generations. We thus propose an egalitarian criterion based on the equal-split guarantee: this requires all agents to find their assigned consumption bundle at least as desirable as the equal division of resources. Finally, we show how to construct a cardinalization of the preferences that enables well-being comparisons: this allows defining the family of critical-level utilitarian orderings that top-rank the egalitarian solution.

Suggested Citation

  • ISAAC, Tanguy & PIACQUADIO, Paolo Giovanni, 2012. "Equity and efficiency in an overlapping generation model," CORE Discussion Papers 2012059, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2012059
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    File URL: http://uclouvain.be/cps/ucl/doc/core/documents/coredp2012_59web.pdf
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    References listed on IDEAS

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    1. Fleurbaey,Marc & Maniquet,François, 2011. "A Theory of Fairness and Social Welfare," Cambridge Books, Cambridge University Press, number 9780521715348, October.
    2. Geir B. Asheim, 2010. "Intergenerational Equity," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 197-222, September.
    3. John Quiggin, 2012. "Equity Between Overlapping Generations," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(2), pages 273-283, March.
    4. Moulin, Herve & Thomson, William, 1988. "Can everyone benefit from growth? : Two difficulties," Journal of Mathematical Economics, Elsevier, vol. 17(4), pages 339-345, September.
    5. Thomson, W, 1987. "Individual and Collective Opportunities," International Journal of Game Theory, Springer;Game Theory Society, vol. 16(4), pages 245-252.
    6. Geir Asheim & Walter Bossert & Yves Sprumont & Kotaro Suzumura, 2010. "Infinite-horizon choice functions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 43(1), pages 1-21, April.
    7. Yves Sprumont, 1998. "Equal factor equivalence in economies with multiple public goods," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 15(4), pages 543-558.
    8. David Cass & Menahem E. Yaari, 1966. "A Re-examination of the Pure Consumption Loans Model," Journal of Political Economy, University of Chicago Press, vol. 74, pages 353-353.
    9. Piacquadio, Paolo G., 2014. "Intergenerational egalitarianism," Journal of Economic Theory, Elsevier, vol. 153(C), pages 117-127.
    10. Moulin, Herve, 1991. "Welfare bounds in the fair division problem," Journal of Economic Theory, Elsevier, vol. 54(2), pages 321-337, August.
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    Cited by:

    1. Piacquadio, Paolo G., 2014. "Intergenerational egalitarianism," Journal of Economic Theory, Elsevier, vol. 153(C), pages 117-127.

    More about this item

    Keywords

    intergenerational equity; intragenerational equity; overlapping generation model; no-envy; equal-split guarantee; allocation rules; utilitarian welfare function;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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