Inequality and Inefficiency in Joint Projects

Debraj Ray, Jean-Marie Baland and Olivier Dagnelie ()

Economic Journal, 2007, vol. 117, issue 522, 922-935

Abstract: A group of agents voluntarily participates in a joint project, in which efforts are not perfectly substitutable. The output is divided according to some given vector of shares. A share vector is "unimprovable" if no other share vector yields a higher sum of payoffs. When the elasticity of substitution across efforts is two or lower, only the perfectly equal share vector is unimprovable, and all other vectors can be improved via Lorenz domination. For higher elasticities of substitution, perfect equality is no longer unimprovable. Our results throw light on the connections between inequality and collective action. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.

Date: 2007
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