Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/147031
Authors: 
Stark, Oded
Jakubek, Marcin
Year of Publication: 
2016
Series/Report no.: 
University of Tübingen Working Papers in Economics and Finance 92
Abstract: 
Let there be two individuals: "rich," and "poor." Due to inefficiency of the income redistribution policy, if a social planner were to tax the rich in order to transfer to the poor, only a fraction of the taxed income would be given to the poor. Under such inefficiency and a standard utility specification, a Rawlsian social planner who seeks to maximize the utility of the worst-off individual will select a different allocation of incomes than a utilitarian social planner who seeks to maximize the sum of the individuals' utilities. However, when individuals prefer not only to have more income but also not to have low status conceptualized as low relative income, and when this distaste is incorporated in the individuals' utility functions with a weight that is greater than a specified critical level, then a utilitarian social planner will select the very same income distribution as a Rawlsian social planner.
Subjects: 
Maximization of social welfare
Rawlsian social welfare function
Utilitarian social welfare function
Inefficient policy of income redistribution
Distaste for low status
JEL: 
D31
D60
H21
I38
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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