Risk Aversion, Inequality Aversion and Optimal Choice of Distributions
This paper considers explicitly costly choice between mean-preserving distributions and a random variable. First, we extend a theorem of Diamond-Rothchild-Stiglitz to our environment. We then apply the result to risk and inequality analysis. W.r.t the former, we generalise Ehrlich and Becker's seminal analysis of self-protection. W.r.t the latter, we establish a sufficient condition for lump-sum-tax-financed and proportional tax-financed expenditure upon reducing inequality in pre-tax income or abilities to increase with society's absolute inequality aversion. This requires everyone's relative inequality aversion to lie within the interval [1,2]. We draw upon empirical evidence to show : Norway may satisfy this requirement ; the U.S. may not. Additionally, we examine the impact of variations in national income upon proportional tax-financed inequality reduction.
|Date of creation:||1983|
|Contact details of provider:|| Postal: CV4 7AL COVENTRY|
Phone: +44 (0) 2476 523202
Fax: +44 (0) 2476 523032
Web page: http://www2.warwick.ac.uk/fac/soc/economics/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:wrk:warwec:245. 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: (Margaret Nash)
If references are entirely missing, you can add them using this form.