Can a concern for status reconcile diverse social welfare programs?

Oded Stark and Marcin Jakubek

No 92, University of Tübingen Working Papers in Business and Economics from University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics

Abstract: Let there be two individuals: "rich," and "poor." Due to inefficiency of the income redistribution policy, if a social planner were to tax the rich in order to transfer to the poor, only a fraction of the taxed income would be given to the poor. Under such inefficiency and a standard utility specification, a Rawlsian social planner who seeks to maximize the utility of the worst-off individual will select a different allocation of incomes than a utilitarian social planner who seeks to maximize the sum of the individuals' utilities. However, when individuals prefer not only to have more income but also not to have low status conceptualized as low relative income, and when this distaste is incorporated in the individuals' utility functions with a weight that is greater than a specified critical level, then a utilitarian social planner will select the very same income distribution as a Rawlsian social planner.

Keywords: Maximization of social welfare; Rawlsian social welfare function; Utilitarian social welfare function; Inefficient policy of income redistribution; Distaste for low status (search for similar items in EconPapers)
JEL-codes: D31 D60 H21 I38 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-pbe and nep-upt
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Related works:
Chapter: Can a Concern for Status Reconcile Diverse Social Welfare Programs? (2016)
Working Paper: Can a concern for status reconcile diverse social welfare programs? (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuewef:92

DOI: 10.15496/publikation-13813

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