Redistribution and Inequality in a Heterogeneous Society
Journal
Economica
ISSN
0013-0427
ISSN-Digital
1468-0335
Type
journal article
Date Issued
2009-10-01
Author(s)
Abstract
This paper analyses how income redistribution affects inequality in a society in which individuals differ in their earning abilities and their preferences for consumption and leisure. After discussing the shortcomings of various standard approaches, I measure inequality in such a heterogeneous society by the inequality in individuals' so-called equivalent wages. This approach suggests that redistribution tends to reduce inequality by transferring income from high-ability to low-ability individuals, but to increase inequality by transferring income from consumption-loving to leisure-loving individuals. These countervailing effects lead in all my simulations to a U-shaped relationship between redistribution and inequality.
Language
English
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Wiley-Blackwell
Publisher place
Oxford
Volume
76
Number
304
Start page
704
End page
718
Pages
15
Subject(s)
Eprints ID
234961