Cost of Inequality, the Uniform Rule and Cooperative Games
The assessment of income inequality can be investigated looking at the solution concepts of the cooperative game theory. We propose a multi-factorial decomposition of the Atkinson index by income sources and evaluate it as a cooperative game of the social cost of inequality. This framework extends the distributive and efficient properties of the uniform rule (Sprumont ) in a setup with heterogeneous income sources and single-peaked preferences. We provide an axiomatic foundation of this preference-based allocation rule, called weakly uniform rule, with a further comparison with the solution concept of nucleolus. Sufficient conditions for their coincidence are therefore defined. Finally we characterize a welfare loss game expressed as the difference between the sum of inequalities generated by each source and the cost of the entire distribution. We show that income factors' contributions may increase or decrease the income inequality in the society ensuring different perspectives in terms of public policies.
|Date of creation:||Feb 2014|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.ecineq.org|
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:inq:inqwps:ecineq2014-322. 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)
If references are entirely missing, you can add them using this form.