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On the Inefficiency of Inequality

  • Schiff, Maurice


    (World Bank)

A number of studies have examined the implications of preference interdependence. This paper models utility as depending on other people’s consumption levels and shows that welfare declines with inequality, equilibrium inequality is inefficient, and the optimal intervention leads to a more equal distribution.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1283.

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Length: 11 pages
Date of creation: Sep 2004
Date of revision:
Handle: RePEc:iza:izadps:dp1283
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  1. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
  2. Alesina, Alberto & Di Tella, Rafael & MacCulloch, Robert, 2004. "Inequality and happiness: are Europeans and Americans different?," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2009-2042, August.
  3. Bénabou, Roland, 1996. "Inequality and Growth," CEPR Discussion Papers 1450, C.E.P.R. Discussion Papers.
  4. Andrew B. Abel, 1990. "Asset Prices under Habit Formation and Catching up with the Joneses," NBER Working Papers 3279, National Bureau of Economic Research, Inc.
  5. John Y. Campbell & John H. Cochrane, 1994. "By Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," CRSP working papers 412, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  6. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
  7. Dayton-Johnson, Jeff & Bardhan, Pranab, 1996. "Inequality and Conservation on the Local Commons: A Theoretical Exercise," Center for International and Development Economics Research, Working Paper Series qt7f9913w9, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  8. repec:oup:qjecon:v:109:y:1994:i:2:p:465-90 is not listed on IDEAS
  9. repec:tpr:qjecon:v:114:y:1999:i:3:p:817-868 is not listed on IDEAS
  10. Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers 004, Institute for Empirical Research in Economics - University of Zurich.
  11. repec:oup:restud:v:60:y:1993:i:1:p:35-52 is not listed on IDEAS
  12. Baland, J-M & Platteau, J-P, 1997. "Wealth Inequality and Efficiency in the Commons," Papers 193, Notre-Dame de la Paix, Sciences Economiques et Sociales.
  13. Alberto Alesina & Dani Rodrik, 1991. "Distributive Politics and Economic Growth," NBER Working Papers 3668, National Bureau of Economic Research, Inc.
  14. Pollak, Robert A, 1976. "Interdependent Preferences," American Economic Review, American Economic Association, vol. 66(3), pages 309-20, June.
  15. Harald Uhlig & Lars Ljungqvist, 2000. "Tax Policy and Aggregate Demand Management under Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 90(3), pages 356-366, June.
  16. Barro, Robert J, 2000. " Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
  17. Robson, Arthur J, 1992. "Status, the Distribution of Wealth, Private and Social Attitudes to Risk," Econometrica, Econometric Society, vol. 60(4), pages 837-57, July.
  18. Bill Dupor & Wen-Fang Liu, 2003. "Jealousy and Equilibrium Overconsumption," American Economic Review, American Economic Association, vol. 93(1), pages 423-428, March.
  19. John Y. Campbell & John Cochrane, 1999. "Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 205-251, April.
  20. repec:oup:qjecon:v:114:y:1999:i:3:p:817-868 is not listed on IDEAS
  21. repec:oup:restud:v:58:y:1991:i:2:p:211-35 is not listed on IDEAS
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