Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/144560
Authors: 
König, Johannes
Schröder, Carsten
Year of Publication: 
2016
Series/Report no.: 
Discussion Paper, School of Business & Economics: Economics 2016/16
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.
Subjects: 
redistribution
public transfers
inequality
optimization methods
interior-point algorithm
bisection method
JEL: 
C61
D63
H23
H53
I38
Document Type: 
Working Paper

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