VALUE PRESERVING WELFARE WEIGHTS FOR SOCIAL OPTIMIZATION PROBLEMS

Alexis Anagnostopoulos, Eva Carceles‐Poveda and Yair Tauman
Authors registered in the RePEc Author Service: Eva Carceles-Poveda

International Economic Review, 2021, vol. 62, issue 4, 1627-1653

Abstract: We propose endogenous, value preserving (VP) welfare weights as an alternative to equal weights utilitarianism. VP weights require that the contribution of an agent's endowments to social welfare is proportional to the contribution of the final allocation to his welfare. Under three axioms, the per unit contribution of a good to welfare is shown to equal the gradient of the welfare function. VP weights coincide with Negishi weights in frictionless environments but prescribe redistribution toward a good's owner when the good's social value exceeds its market value. When ability is treated as an endowment, VP weights reward ability and effort.

Date: 2021
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https://doi.org/10.1111/iere.12530

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Working Paper: Value Preserving Welfare Weights for Social Optimization Problems (2016)
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