Concavity of Utility, Concavity of Welfare, and Redistribution of Income

Louis Kaplow

No 10005, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The marginal social value of income redistribution is understood to depend on both the concavity of individuals' utility functions and the concavity of the social welfare function. In the pertinent literatures, notably on optimal income taxation and on normative inequality measurement, it seems to be accepted that the role of these two sources of concavity is symmetric with regard to the social concern about inequality in the distribution of income. Direct examination of the question, however, reveals that this is not the case. Concavity of utility has a simple, direct effect on the marginal social value of redistribution, as might be expected, whereas concavity of the social welfare function has a more subtle influence, one that in some cases may not be very significant. The implications of this difference are examined for some standard forms of utility and welfare functions, including particular versions that appear in the optimal income taxation literature.

JEL-codes: D31 D63 (search for similar items in EconPapers)
Date: 2003-09
Note: LE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published as Louis Kaplow, 2010. "Concavity of utility, concavity of welfare, and redistribution of income," International Tax and Public Finance, Springer, vol. 17(1), pages 25-42, February.

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