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A fair solution to the compensation problem

  • Giacomo, VALETTA
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    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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    File URL: http://sites.uclouvain.be/econ/DP/IRES/2007-38.pdf
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    Paper provided by Université catholique de Louvain, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2007038.

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    Length: 34
    Date of creation: 01 Dec 2007
    Date of revision:
    Handle: RePEc:ctl:louvec:2007038
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    Web page: http://www.uclouvain.be/econ
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    1. M. Fleurbaey & F. Maniquet, 2008. "Fair social orderings," Economic Theory, Springer, vol. 34(1), pages 25-45, January.
    2. 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).
    3. repec:oup:restud:v:73:y:2006:i:1:p:55-83 is not listed on IDEAS
    4. Dirk Van de gaer & Marc Fleurbaey & Walter Bossert, 1999. "Responsibility, talent, and compensation: A second-best analysis," Review of Economic Design, Springer, vol. 4(1), pages 35-55.
    5. Marc Fleurbaey & François Maniquet, 2006. "Compensation and responsibility," Working Papers halshs-00121367, HAL.
    6. Marc Fleurbaey & Francois Maniquet, 2002. "Fair Income Tax," Economics Working Papers 0021, Institute for Advanced Study, School of Social Science.
    7. MANIQUET, François & SPRUMONT, Yves, 2002. "Fair Production and Allocation of an Excludable Nonrival Good," Cahiers de recherche 2002-04, Universite de Montreal, Departement de sciences economiques.
    8. Francois Maniquet, 2002. "On the Equivalence between Welfarism and Equality of Opportunity," Economics Working Papers 0022, Institute for Advanced Study, School of Social Science.
    9. Marc Fleurbaey, 2001. "The Pazner-Schmeidler Social Ordering: A Defense," Center for Mathematical Economics Working Papers 328, Center for Mathematical Economics, Bielefeld University.
    10. Francois Maniquet & Yves Sprumont, 2002. "Welfare Egalitarianism in Non-Rival Environments," Economics Working Papers 0016, Institute for Advanced Study, School of Social Science.
    11. Elisha A. Pazner & David Schmeidler, 1978. "Egalitarian Equivalent Allocations: A New Concept of Economic Equity," The Quarterly Journal of Economics, Oxford University Press, vol. 92(4), pages 671-687.
    12. Thomson, W., 1996. "Consistent Allocation Rules," RCER Working Papers 418, University of Rochester - Center for Economic Research (RCER).
    13. Hammond, Peter J, 1976. "Equity, Arrow's Conditions, and Rawls' Difference Principle," Econometrica, Econometric Society, vol. 44(4), pages 793-804, July.
    14. Fleurbaey Marc, 1995. "Three Solutions for the Compensation Problem," Journal of Economic Theory, Elsevier, vol. 65(2), pages 505-521, April.
    15. Claude D'Aspremont & Louis Gevers, 1977. "Equity and the Informational Basis of Collective Choice," Review of Economic Studies, Oxford University Press, vol. 44(2), pages 199-209.
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