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The´Efficiency`of Equity

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Abstract

In standard neo-classical economics, efficiency and equity issues are largely treated as separate and separable issues. In this paper, I will discuss findings from four strands of literature that challenge this separability and in fact suggest that greater equity will promote greater efficiency in the sense of maximizing well-being in a society. There four strands refer to findings from the experimental literature on the importance of equity or fairness, the subjective well-being literature on the importance of relative incomes and inequality on subjective well-being, the distribution-adjusted well-being literature that combines measures of mean incomes with measures of income inequality to derive at welfare judgements across space and time, and the literature on the relationship between income and gender inequality on economic growth. Some implications for research and policy are explored.

Suggested Citation

  • Stephan Klasen, 2006. "The´Efficiency`of Equity," Ibero America Institute for Econ. Research (IAI) Discussion Papers 145, Ibero-America Institute for Economic Research.
  • Handle: RePEc:got:iaidps:145
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    File URL: http://www2.vwl.wiso.uni-goettingen.de/ibero/working_paper_neu/DB145.pdf
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    References listed on IDEAS

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    1. Maurice Obstfeld, 1998. "The Global Capital Market: Benefactor or Menace?," Journal of Economic Perspectives, American Economic Association, pages 9-30.
    2. Joseph E. Stiglitz & Shahid Yusuf, 2001. "Rethinking the East Asian Miracle," World Bank Publications, The World Bank, number 13969.
    3. Peter H. Lindert & Jeffrey G. Williamson, 2003. "Does Globalization Make the World More Unequal?," NBER Chapters,in: Globalization in Historical Perspective, pages 227-276 National Bureau of Economic Research, Inc.
    4. Klasen, Stephan, 2000. "Measuring Poverty and Deprivation in South Africa," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(1), pages 33-58, March.
    5. Surjit S. Bhalla, 2004. "Poor Results and Poorer Policy: A Comparative Analysis of Estimates of Global Inequality and Poverty," CESifo Economic Studies, CESifo, vol. 50(1), pages 85-132.
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    More about this item

    Keywords

    Efficiency; equity; experimental economics; subjective well-being;

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments

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