IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Which Inequality? The Inequality of Endowments Versus the Inequality of Rewards

Society often allocates valuable resources - such as prestigious positions, salaries, or marriage partners - via tournament-like institutions. In such situations, inequality affects incentives to compete and hence has a direct effect on equilibrium choices and hence material outcomes. We introduce a new distinction between inequality in initial endowments (e.g. ability, inherited wealth) and inequality of what one can obtain as rewards (e.g. prestigious positions, money). We show that these two types of inequality have opposing effects on equilibrium behavior and wellbeing. Greater inequality of rewards tends to hurt most people — both the middle class and the poor, — who are forced into greater effort. In contrast, greater inequality of endowments tends to benefit the middle class. Thus, which type of inequality is considered hugely affects the correctness of our intuitions about the implications of inequality.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.econ.ed.ac.uk/papers/HopkinsKornienko.pdf
Download Restriction: no

Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 185.

as
in new window

Length: 40
Date of creation: Mar 2008
Date of revision:
Handle: RePEc:edn:esedps:185
Contact details of provider: Postal: 31 Buccleuch Place, EH8 9JT, Edinburgh
Phone: +44(0)1316508361
Fax: +44(0)1316504514
Web page: http://www.econ.ed.ac.uk/

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Ed Hopkins & Tatiana Kornienko, 2004. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," American Economic Review, American Economic Association, vol. 94(4), pages 1085-1107, September.
  2. Harold L. Cole & George J. Mailath & Andrew Postlewaite, 1996. "Class systems and the enforcement of social norms," Staff Report 213, Federal Reserve Bank of Minneapolis.
  3. Charness, Gary B & Rabin, Matthew, 2001. "Understanding Social Preferences With Simple Tests," University of California at Santa Barbara, Economics Working Paper Series qt0dc3k4m5, Department of Economics, UC Santa Barbara.
  4. Fernández, Raquel & Galí, Jordi, 1997. "To Each According To...? Markets, Tournaments, and the Matching Problem with Borrowing Constraints," CEPR Discussion Papers 1627, C.E.P.R. Discussion Papers.
  5. Konrad, Kai A., 2007. "Strategy in contests: an introduction
    [Strategie in Turnieren – eine Einführung]
    ," Discussion Papers, Research Unit: Market Processes and Governance SP II 2007-01, Social Science Research Center Berlin (WZB).
  6. Wing Suen, 2005. "The Comparative Statics of Differential Rents in Two-Sided Matching Markets," Departmental Working Papers _172, Chinese University of Hong Kong, Department of Economics.
  7. Deaton, A., 2001. "Health, Inequality, and Economic Development," Papers 200, Princeton, Woodrow Wilson School - Development Studies.
  8. Brown, Gordon D. A. & Gardner, Jonathan & Oswald, Andrew J. & Qian, Jing, 2005. "Does Wage Rank Affect Employees' Wellbeing?," IZA Discussion Papers 1505, Institute for the Study of Labor (IZA).
  9. Gary S. Becker & Kevin M. Murphy & Ivan Werning, 2005. "The Equilibrium Distribution of Income and the Market for Status," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 282-310, April.
  10. Schotter, Andrew & Weigelt, Keith, 1992. "Asymmetric Tournaments, Equal Opportunity Laws, and Affirmative Action: Some Experimental Results," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 511-39, May.
  11. Zenginobuz, Unal, 1996. "Concern for relative position, rank-order contests, and contributions to public goods," MPRA Paper 388, University Library of Munich, Germany.
  12. James Konow, 2003. "Which Is the Fairest One of All? A Positive Analysis of Justice Theories," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1188-1239, December.
  13. Hopkins, Ed, 2008. "Inequality, Happiness and Relative Concerns: What Actually is their Relationship?," SIRE Discussion Papers 2008-01, Scottish Institute for Research in Economics (SIRE).
  14. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 817-868, August.
  15. Robert M. Costrell & Glenn C. Loury, 2004. "Distribution of Ability and Earnings in a Hierarchical Job Assignment Model," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1322-1363, December.
  16. Phelps Brown, Henry, 1988. "Egalitarianism and the Generation of Inequality," OUP Catalogue, Oxford University Press, number 9780198286486, March.
  17. Robert Frank, 2000. "Does Growing Inequality Harm the Middle Class?," Eastern Economic Journal, Eastern Economic Association, vol. 26(3), pages 253-264, Summer.
  18. Cole, Harold L & Mailath, George J & Postlewaite, Andrew, 1992. "Social Norms, Savings Behavior, and Growth," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1092-1125, December.
  19. Mailath, George J, 1987. "Incentive Compatibility in Signaling Games with a Continuum of Types," Econometrica, Econometric Society, vol. 55(6), pages 1349-65, November.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:edn:esedps:185. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gina Reddie)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.