Income redistribution going awry: The reversal power of the concern for relative deprivation

Gerhard Sorger, Oded Stark

Research output: Contribution to journalArticlepeer-review

Abstract

We demonstrate that a rank-preserving transfer from a richer individual to a poorer individual can exacerbate income inequality (when inequality is measured by the Gini coefficient). This happens when individuals' preferences depend negatively not only on work time (effort) but also on low relative income. It is rigorously shown that the set of preference profiles that gives rise to this perverse effect of a transfer on inequality is a non-empty open subset of all preference profiles. A robust example illustrates this result.

Original languageEnglish
Pages (from-to)1-9
Number of pages9
JournalJournal of Economic Behavior and Organization
Volume86
DOIs
StatePublished - Feb 2013
Externally publishedYes

Keywords

  • A rank-preserving inequality-narrowing transfer
  • Exacerbated inequality
  • Low relative income
  • Relative deprivation
  • The Gini coefficient

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