Consumption rigths: a market mechanism to redistribute wealth

Jorge Rivera and Francisco Martínez

Working Papers from University of Chile, Department of Economics

Abstract: In an exchange economy with only private consumption goods we propose acompetitive mechanism to reach any income distribution. We introduce the socalled consumption rights, which is a real parameter that modifies thebudgetaryconstraint of individuals but does not participate in the utility functions.Consumption rights can be traded in the market, which is the main diferencewith slack parameters, as fiat money or tax inflation, widely known asmethods tomodify the distribution of wealth. The policy maker control variables areboththe amount of rights assigned to each individual and a pricing rule thatdefines the rate of exchange between rights and wealth. The onlyintervention of the planner will be trough the definition of the policy,because the redistribution of wealth will be the consequence of thecompetitive exchange among consumers.

Keywords: income redistribution; competitive equilibrium; consumption rights. (search for similar items in EconPapers)
JEL-codes: D31 D51 D63 H21 (search for similar items in EconPapers)
Date: 2005-11
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