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Consumption rigths: a market mechanism to redistribute wealth

  • Jorge Rivera C.
  • Francisco Martínez

In an exchange economy with only private consumption goods we propose acompetitive mechanism to reach any income distribution. We introduce the socalled consumption rights, which is a real parameter that modifies thebudgetaryconstraint of individuals but does not participate in the utility functions.Consumption rights can be traded in the market, which is the main diferencewith slack parameters, as fiat money or tax inflation, widely known asmethods tomodify the distribution of wealth. The policy maker control variables areboththe amount of rights assigned to each individual and a pricing rule thatdefines the rate of exchange between rights and wealth. The onlyintervention of the planner will be trough the definition of the policy,because the redistribution of wealth will be the consequence of thecompetitive exchange among consumers.

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Paper provided by University of Chile, Department of Economics in its series Working Papers with number wp215.

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Date of creation: Nov 2005
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Handle: RePEc:udc:wpaper:wp215
Contact details of provider: Web page: http://www.econ.uchile.cl/

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  1. AUMANN, Robert J. & DREZE, Jacques H., . "Values of markets with satiation or fixed prices," CORE Discussion Papers RP -722, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  3. Kocherlakota, Narayana R., 1998. "Money Is Memory," Journal of Economic Theory, Elsevier, vol. 81(2), pages 232-251, August.
  4. Montero, Juan-Pablo, 2001. "Multipollutant Markets," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 762-74, Winter.
  5. Balasko, Yves, 1982. "Equilibria and efficiency in the fixprice setting," Journal of Economic Theory, Elsevier, vol. 28(1), pages 113-127, October.
  6. Peter J. Hammond, 1999. "Equal Rights to Trade and Mediate," Working Papers 99019, Stanford University, Department of Economics.
  7. Aumann, Robert J & Kurz, Mordecai, 1977. "Power and Taxes," Econometrica, Econometric Society, vol. 45(5), pages 1137-61, July.
  8. John Pezzey, 1992. "The Symmetry between Controlling Pollution by Price and Controlling It by Quantity," Canadian Journal of Economics, Canadian Economics Association, vol. 25(4), pages 983-91, November.
  9. Brown, Donald J., 1991. "Equilibrium analysis with non-convex technologies," Handbook of Mathematical Economics, in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 36, pages 1963-1995 Elsevier.
  10. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
  11. Bonnisseau, J.-M. & Cornet, B., 1986. "Valuation equilibrium and Pareto optimum in nonconvex economies," CORE Discussion Papers 1986036, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Makarov, V. L., 1981. "Some results on general assumptions about the existence of economic equilibrium," Journal of Mathematical Economics, Elsevier, vol. 8(1), pages 87-99, March.
  13. Roemer, John E, 1986. "Equality of Resources Implies Equality of Welfare," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 751-84, November.
  14. repec:cup:cbooks:9780521497695 is not listed on IDEAS
  15. Calvo, Guillermo A & Guidotti, Pablo E, 1993. "On the Flexibility of Monetary Policy: The Case of the Optimal Inflation Tax," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 667-87, July.
  16. Balasko, Yves & Shell, Karl, 1981. "The overlapping-generations model. II. The case of pure exchange with money," Journal of Economic Theory, Elsevier, vol. 24(1), pages 112-142, February.
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