The Picketty Inequality in the Nash-Bargained Social Contract

Raul Fabella

No 201413, UP School of Economics Discussion Papers from University of the Philippines School of Economics

Abstract: As a proxy for a Pareto-efficient market economy, we adopt the two-party Nash Bargaining model featuring a qualitative bias in the treatment of the contributions of the parties. The Piketty inequality here is the share in total welfare accruing to the richer party over total welfare attained at agreement point. We show that this inequality can never exceed the inequality in initial contributions if the qualitative bias is zero. The rising Piketty inequality requires that the qualitative bias exceed a positive threshold. The Piketty trajectory emerges if the qualitative bias oscillates around the threshold due to changing social and economic environment.

Keywords: Piketty; Inequality; Nash Bargaining (search for similar items in EconPapers)
JEL-codes: C78 D31 D63 D71 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2014-09
New Economics Papers: this item is included in nep-ger, nep-gth and nep-sea
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published as UPSE Discussion Paper No. 2014-13, September 2014

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Persistent link: https://EconPapers.repec.org/RePEc:phs:dpaper:201413

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