Income redistribution going awry: The reversal power of the concern for relative deprivation

Gerhard Sorger and Oded Stark

No 142407, Discussion Papers from University of Bonn, Center for Development Research (ZEF)

Abstract: We demonstrate that a rank-preserving transfer from a richer individual to a poorer individual can exacerbate income inequality (when inequality is measured by the Gini coefficient). This happens when individuals’ preferences depend negatively not only on work time (effort) but also on low relative income. It is rigorously shown that the set of preference profiles that gives rise to this perverse effect of a transfer on inequality is a non-empty open subset of all preference profiles. A robust example illustrates this result.

Keywords: Consumer/Household Economics; Financial Economics; Institutional and Behavioral Economics; Labor and Human Capital; Productivity Analysis (search for similar items in EconPapers)
Pages: 17
Date: 2012-12
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Related works:
Journal Article: Income redistribution going awry: The reversal power of the concern for relative deprivation (2013)
Working Paper: Income redistribution going awry: The reversal power of the concern for relative deprivation (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ubzefd:142407

DOI: 10.22004/ag.econ.142407

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