Inequality-minimization with a given public budget

Johannes König and Carsten Schröder

No 2016/16, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: We solve the problem of a social planner who seeks to minimize inequality via transfers with a fixed public budget in a distribution of exogenously given incomes. The appropriate solution method depends on the objective function: If it is convex, as in the case of the absolute mean deviation, it can be solved by an interior-point algorithm. If it is quasiconvex, as in case of the Gini coefficient, the bisection method can be used. We implement the procedures using artificial and real-world data, and show that the optimal transfer scheme need not comply with a transfer scheme that perfectly equalizes incomes at the bottom of the distribution.

Keywords: redistribution; public transfers; inequality; optimization methods; interior-point algorithm; bisection method (search for similar items in EconPapers)
JEL-codes: C61 D63 H23 H53 I38 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-cse and nep-pbe
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Related works:
Journal Article: Inequality-minimization with a given public budget (2018)
Journal Article: Inequality-minimization with a given public budget (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fubsbe:201616

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