THE FRUSTRATION AND ENHANCEMENT OF INCOME REDISTRIBUTION

Ephraim Kleiman

Kyklos, 1972, vol. 25, issue 2, 288-305

Abstract: When factor intensities differ among products, and factor supplies are constant, factor shares vary with the composition of output. But if the proportions in which factors are owned vary from one consumer group to another, the economy's product‐mix itself may be a function of factor shares. A simple geometric model is developed to demonstrate the simultaneous determination of income distribution and output structure. It is then shown that transfers of income, by changing the product‐mix, may cause a further change in income distribution. With consumers preferring goods intensive in the factor they own, an income transfer's redistribution effects are enhanced; with them preferring goods intensive in factors owned by others, income transfers are partially frustrated.

Date: 1972
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