IDEAS home Printed from https://ideas.repec.org/p/inq/inqwps/ecineq2007-69.html
   My bibliography  Save this paper

The Impossibility of a Just Pigouvian

Author

Listed:
  • Casilda Lasso de la Vega

    (University of the Basque Country)

  • Christian Seidl

    (University of Kiel)

Abstract

An income inequality measure satisfies the Pigou-Dalton transfer principle if progressive transfers decrease income inequality. When transfers cause transaction costs, one can trace out the maximum leakage such that the transfer pays at the margin. An income inequality measure is leaky-bucket consistent if the transaction costs of a transfer are neither negative nor do the exceed the amount of the transfer. We show that the Pigou-Dalton transfer principle and leaky-bucket consistency are not reconcilable. Experimental research has shown that subjects’ behavior exhibit graded compensating justice, that is compensating income changes which maintain the degree of income inequality and point in the same direction should provide less income compensation for richer than for poorer income recipients. We show also that the Pigou-Dalton transfer principle and graded compensating justice are not reconcilable.

Suggested Citation

  • Casilda Lasso de la Vega & Christian Seidl, 2007. "The Impossibility of a Just Pigouvian," Working Papers 69, ECINEQ, Society for the Study of Economic Inequality.
  • Handle: RePEc:inq:inqwps:ecineq2007-69
    as

    Download full text from publisher

    File URL: http://www.ecineq.org/milano/WP/ECINEQ2007-69.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. repec:sbe:breart:v:21:y:2001:i:2:a:2751 is not listed on IDEAS
    2. Eva Camacho-Cuena & Tibor Neugebauer & Christian Seidl, 2007. "Leaky Buckets Versus Compensating Justice: An Experimental Investigation," Working Papers 74, ECINEQ, Society for the Study of Economic Inequality.
    3. Bossert, Walter & Pfingsten, Andreas, 1990. "Intermediate inequality: concepts, indices, and welfare implications," Mathematical Social Sciences, Elsevier, vol. 19(2), pages 117-134, April.
    4. Dagum, Camilo, 1990. "On the relationship between income inequality measures and social welfare functions," Journal of Econometrics, Elsevier, pages 91-102.
    5. Kolm, Serge-Christophe, 1976. "Unequal inequalities. II," Journal of Economic Theory, Elsevier, vol. 13(1), pages 82-111, August.
    6. Amiel, Yoram & Cowell, Frank A., 1992. "Measurement of income inequality : Experimental test by questionnaire," Journal of Public Economics, Elsevier, pages 3-26.
    7. Coral del RÎo & Javier Ruiz-Castillo, 2000. "Intermediate inequality and welfare," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 17(2), pages 223-239.
    8. Christian Seidl, 2001. "Inequality measurement and the leaky-bucket paradox," Economics Bulletin, AccessEcon, vol. 4(6), pages 1-7.
    9. Kolm, Serge-Christophe, 1976. "Unequal inequalities. I," Journal of Economic Theory, Elsevier, vol. 12(3), pages 416-442, June.
    10. Peter Lambert & Giuseppe Lanza, 2006. "The effect on inequality of changing one or two incomes," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, pages 253-277.
    11. Blackorby, Charles & Donaldson, David, 1978. "Measures of relative equality and their meaning in terms of social welfare," Journal of Economic Theory, Elsevier, vol. 18(1), pages 59-80, June.
    12. Buhong Zheng, 2007. "Unit-Consistent Decomposable Inequality Measures," Economica, London School of Economics and Political Science, vol. 74(293), pages 97-111, February.
    13. Harrison, Elizabeth & Seidl, Christian, 1994. "Perceptional Inequality and Preferential Judgements: An Empirical Examination of Distributional Axioms," Public Choice, Springer, vol. 79(1-2), pages 61-81, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Traub, Stefan & Seidl, Christian & Schmidt, Ulrich, 2009. "An experimental study on individual choice, social welfare, and social preferences," European Economic Review, Elsevier, vol. 53(4), pages 385-400, May.

    More about this item

    Keywords

    Income distribution; Intermediate inequality indices; Unit-consistency;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inq:inqwps:ecineq2007-69. 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: (Maria Ana Lugo). General contact details of provider: http://edirc.repec.org/data/ecineea.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.