Which Inequality? The Inequality of Endowments versus the Inequality of Rewards

Ed Hopkins and Tatiana Kornienko

American Economic Journal: Microeconomics, 2010, vol. 2, issue 3, 106-37

Abstract: We introduce a new distinction between inequality in initial endowments (e.g., ability, inherited wealth) and inequality of what one can obtain as rewards (e.g., prestigious positions, money). We show that, when society allocates resources via tournaments, these two types of inequality have opposing effects on equilibrium behavior and well-being. Greater inequality of rewards hurts most people -- both the middle class and the poor -- who are forced into greater effort. Conversely, greater inequality of endowments benefits the middle class. Thus, the correctness of our intuitions about the implications of inequality is hugely affected by the type of inequality considered. (JEL D63, D82)

JEL-codes: D63 D82 (search for similar items in EconPapers)
Date: 2010
Note: DOI: 10.1257/mic.2.3.106
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (52)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/mic.2.3.106 (application/pdf)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Which Inequality? The Inequality of Endowments Versus the Inequality of Rewards (2008)
Working Paper: Which Inequality? The Inequality of Endowments Versus the Inequality of Rewards (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejmic:v:2:y:2010:i:3:p:106-37

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Journal: Microeconomics is currently edited by Johannes Hörner

More articles in American Economic Journal: Microeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().