Should Income Inequality be Praised? Multiple Public Goods Provision, Income Distribution and Social Welfare

Jun-ichi Itaya () and Atsue Mizushima

No 6215, CESifo Working Paper Series from CESifo

Abstract: We investigate how income inequality affects social welfare in a model of voluntary contributions to multiple pure public goods. Itaya, de Meza, and Myles (1997) show that the maximization of social welfare precludes income equality in a single pure public good model. In contrast, we show that the result of Itaya et al. may not be valid in a case of multiple voluntarily supplied public goods; specifically, we show that not only an income inequality-raising redistribution policy but also an income-equalizing one may raise social welfare. We also show that if altruistically motivated voluntary transfers are allowed, an inequality-raising redistribution policy is no longer effective and leaves social welfare unchanged.

Keywords: public goods; inequality; social welfare; voluntary provision; income distribution (search for similar items in EconPapers)
JEL-codes: D31 D63 D64 H23 H31 (search for similar items in EconPapers)
Date: 2016
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Working Paper: Should income inequality be praised? Multiple public goods provision, income distribution, and social welfare (2016)
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