The Distribution of Wealth and the Efficiency of Institutions

B. Eaton () and William D White

Economic Inquiry, 1991, vol. 29, issue 2, 336-50

Abstract: This paper explores the effect on economic efficiency of the distribution of wealth and systems for enforcing property rights. The authors construct a two-person, two-period economy in which each person can consume, plant, transfer, or steal corn. They find circumstances in which redistribution of wealth is Pareto optimal and in which increasing sanctions against theft to the maximum level is not. These results suggest that it is not only important to consider distribution in the design of property institutions, but also that redistribution itself may serve to increase the efficiency of systems of property rights. Copyright 1991 by Oxford University Press.

Date: 1991
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