Optimal control of inequality under uncertainty
We consider the optimal control of inequality under uncertainty, with a particular focus on income inequality. For an economy experiencing economic growth and random shocks, we show how a simple loss and `bequest' function may be combined to guide the expected level of inequality towards a pre-defined target within a finite planning horizon. Closed form solutions show that, the stronger the shocks to the income distribution, the more aggressive is policy. We discuss the results in the context of recent applied and policy literature on social inequality, globalisation and economic instability.
|Date of creation:||Mar 2012|
|Contact details of provider:|| Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom|
Phone: (0)1904 323776
Web page: https://www.york.ac.uk/economics/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shorrocks, A F, 1980. "The Class of Additively Decomposable Inequality Measures," Econometrica, Econometric Society, vol. 48(3), pages 613-625, April.
- Stephen P. Jenkins & Philippe Van Kerm, 2006.
"Trends in income inequality, pro-poor income growth, and income mobility,"
Oxford Economic Papers,
Oxford University Press, vol. 58(3), pages 531-548, July.
- Jenkins, Stephen P. & Van Kerm, Philippe, 2003. "Trends in income inequality, pro-poor income growth and income mobility," IRISS Working Paper Series 2003-11, IRISS at CEPS/INSTEAD.
- Stephen P. Jenkins & Philippe VanKerm, 2003. "Trends in Income Inequality, Pro-Poor Income Growth and Income Mobility," Discussion Papers of DIW Berlin 377, DIW Berlin, German Institute for Economic Research.
- Jenkins, Stephen P. & Van Kerm, Philippe, 2003. "Trends in Income Inequality, Pro-Poor Income Growth and Income Mobility," IZA Discussion Papers 904, Institute for the Study of Labor (IZA).
- Jenkins, Stephen P. & Van Kerm, Philippe, 2003. "Trends in income inequality, pro-poor income growth and income mobility," ISER Working Paper Series 2003-27, Institute for Social and Economic Research.
- Poterba, James M., 2007. "Income inequality and income taxation," Journal of Policy Modeling, Elsevier, vol. 29(4), pages 623-633.
- Claudio Zoli, 1999. "Intersecting generalized Lorenz curves and the Gini index," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 16(2), pages 183-196.
- Hongyi Li & Danyang Xie & Heng-Fu Zou, 2000. "Dynamics of income distribution," Canadian Journal of Economics, Canadian Economics Association, vol. 33(4), pages 937-961, November.
- Hongyi Li & Danyang Xie & Heng-fu Zou, 1999. "Dynamics of Income Distribution," CEMA Working Papers 76, China Economics and Management Academy, Central University of Finance and Economics.
- Hongyi Li & Danyang Xie & Heng-fu Zou, 2002. "Dynamics of Income Distribution," GE, Growth, Math methods 0210001, EconWPA.
- Anthony F. Shorrocks & James E. Foster, 1987. "Transfer Sensitive Inequality Measures," Review of Economic Studies, Oxford University Press, vol. 54(3), pages 485-497.
- Mattias Lundberg & Lyn Squire, 2003. "The simultaneous evolution of growth and inequality," Economic Journal, Royal Economic Society, vol. 113(487), pages 326-344, April.
- Jonathan Heathcote & Fabrizio Perri & Giovanni L. Violante, 2010. "Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States: 1967-2006," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 15-51, January.
- Heathcote, Jonathan & Perri, Fabrizio & Violante, Giovanni L, 2009. "Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States, 1967-2006," CEPR Discussion Papers 7538, C.E.P.R. Discussion Papers.
- Jonathan Heathcote & Fabrizio Perri & Giovanni L. Violante, 2009. "Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States, 1967-2006," NBER Working Papers 15483, National Bureau of Economic Research, Inc.
- Jonathan Heathcote & Fabrizio Perri & Giovanni L. Violante, 2009. "Unequal we stand: an empirical analysis of economic inequality in the United States, 1967-2006," Staff Report 436, Federal Reserve Bank of Minneapolis.
- Casilda Lasso de la Vega & Ana Urrutia, 2008. "The ‘Extended’ Atkinson family: The class of multiplicatively decomposable inequality measures, and some new graphical procedures for analysts," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 6(2), pages 211-225, June.
- Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
- Richard Blundell & Ben Etheridge, 2010. "Consumption, Income and Earnings Inequality in Britain," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 76-102, January.
- Richard Blundell & Ben Etheridge, 2009. "Code and data files for "Consumption, Income and Earnings Inequality in Britain"," Computer Codes 09-202, Review of Economic Dynamics.
- 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, vol. 4(3), pages 253-277, December.
- Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
- Ewald, Christian-Oliver & Wang, Wen-Kai, 2011. "Analytic solutions for infinite horizon stochastic optimal control problems via finite horizon approximation: A practical guide," Mathematical Social Sciences, Elsevier, vol. 61(3), pages 146-151, May. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:yor:yorken:12/07. 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: (Paul Hodgson)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.