Advantageous redistribution with three smooth CES utility functions

Minwook Kang and Lei Sandy Ye

Journal of Mathematical Economics, 2016, vol. 67, issue C, 171-180

Abstract: We present a parametric example of three-country advantageous redistribution with two Cobb–Douglas utility functions and one CES utility function for which the elasticity of substitution is 1/2. This paper indicates that the possibility of advantageous redistribution strongly depends on the three countries’ taste patterns, endowment distributions, and the elasticity of substitution. In particular, we will show with specific examples that greater difference between the donor and recipient’s taste patterns and a lower elasticity of substitution can increase the chance of advantageous redistribution.

Keywords: Advantageous redistribution; Transfer paradox; CES utility (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:67:y:2016:i:c:p:171-180

DOI: 10.1016/j.jmateco.2016.08.002

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