Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/51934
Authors: 
Kölle, Felix
Sliwka, Dirk
Zhou, Nannan
Year of Publication: 
2011
Series/Report no.: 
Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 5514
Abstract: 
We investigate the effects of inequality in wealth on the incentives to contribute to a public good when agents are inequity averse and may differ in ability. We show that equality may lead to a reduction of public good provision below levels generated by purely selfish agents. But introducing inequality motivates more productive agents to exert higher efforts and help the group to coordinate on equilibria with less free-riding. As a result, less able agents may benefit from initially disadvantageous inequality. Moreover, the more inequity averse the agents, the more inequality should be imposed even by an egalitarian social planner.
Subjects: 
public goods
inequality
inequity aversion
social welfare
voluntary provision
income distribution
heterogeneity
JEL: 
H41
D31
D63
J31
M52
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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