Inequality-minimization with a given public budget

Johannes König and Carsten Schröder

The Journal of Economic Inequality, 2018, vol. 16, issue 4, No 7, 607-629

Abstract: Abstract We solve the problem of a social planner who seeks to minimize inequality via transfers with a fixed public budget in a distribution of exogenously given incomes. The appropriate solution method depends on the objective function: If it is convex, it can be solved by an interior-point algorithm. If it is quasiconvex, the bisection method can be used. Using artificial and real-world data, we implement the procedures and show that the optimal transfer scheme need not comply with a transfer scheme that perfectly equalizes incomes at the bottom of the distribution.

Keywords: Redistribution; Public transfers; Inequality; Optimization methods; Interior-point algorithm; Bisection method (search for similar items in EconPapers)
Date: 2018
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Journal Article: Inequality-minimization with a given public budget (2018)
Working Paper: Inequality-minimization with a given public budget (2016)
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DOI: 10.1007/s10888-018-9380-3

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