IDEAS home Printed from https://ideas.repec.org/a/bla/jpbect/v23y2021i5p801-821.html
   My bibliography  Save this article

Monopolistic supply of sorting, inequality, and welfare

Author

Listed:
  • Lisa Windsteiger

Abstract

Why is an increase in income inequality often accompanied by an increase in socioeconomic segregation? And what are the welfare implications of this comovement? This paper uses a theoretical model to analyze the relationship between income inequality and socioeconomic segregation. It shows that rising inequality can trigger sorting according to income, as a monopolist's profits from offering sorting increase with income inequality. It also examines the relationship between sorting and social welfare and shows that profit‐maximizing sorting patterns are not necessarily optimal from a welfare perspective. In fact, for a broad field of income distributions (monopolist) profits increase with inequality, while at the same time total welfare from sorting decreases.

Suggested Citation

  • Lisa Windsteiger, 2021. "Monopolistic supply of sorting, inequality, and welfare," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(5), pages 801-821, October.
  • Handle: RePEc:bla:jpbect:v:23:y:2021:i:5:p:801-821
    DOI: 10.1111/jpet.12518
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/jpet.12518
    Download Restriction: no

    File URL: https://libkey.io/10.1111/jpet.12518?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Gilat Levy & Ronny Razin, 2017. "The Coevolution of Segregation, Polarized Beliefs, and Discrimination: The Case of Private versus State Education," American Economic Journal: Microeconomics, American Economic Association, vol. 9(4), pages 141-170, November.
    2. Raquel Fernandez & Richard Rogerson, 2003. "Equity and Resources: An Analysis of Education Finance Systems," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 858-897, August.
    3. Heidrun C. Hoppe & Benny Moldovanu & Aner Sela, 2009. "The Theory of Assortative Matching Based on Costly Signals," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 76(1), pages 253-281.
    4. Amihai Glazer & Kai A. Konrad, 2008. "A Signaling Explanation for Charity," Springer Books, in: Roger D. Congleton & Kai A. Konrad & Arye L. Hillman (ed.), 40 Years of Research on Rent Seeking 2, pages 713-722, Springer.
    5. Tara Watson, 2009. "Inequality And The Measurement Of Residential Segregation By Income In American Neighborhoods," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(3), pages 820-844, September.
    6. Rabah Amir & Jean Gabszewicz & Joana Resende, 2014. "Thematic Clubs and the Supremacy of Network Externalities," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(5), pages 706-729, October.
    7. Pesendorfer, Wolfgang, 1995. "Design Innovation and Fashion Cycles," American Economic Review, American Economic Association, vol. 85(4), pages 771-792, September.
    8. Ellickson, Bryan, 1971. "Jurisdictional Fragmentation and Residential Choice," American Economic Review, American Economic Association, vol. 61(2), pages 334-339, May.
    9. Gary S. Becker, 1974. "A Theory of Marriage," NBER Chapters, in: Economics of the Family: Marriage, Children, and Human Capital, pages 299-351, National Bureau of Economic Research, Inc.
    10. Cowell, F.A., 2000. "Measurement of inequality," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 2, pages 87-166, Elsevier.
    11. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64(5), pages 416-416.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sam‐Ho Lee, 2023. "Theory of cultural capital: Productive use of an unproductive activity," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(2), pages 359-375, April.
    2. Rabah Amir & Myrna Wooders, 2021. "Introduction to the special issue on markets, policies, and economic design: Theory and experiments," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(5), pages 765-771, October.
    3. Greg Leo & Jian Lou & Martin Van der Linden & Yevgeniy Vorobeychik & Myrna Wooders, 2021. "Matching soulmates," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(5), pages 822-857, October.
    4. Windsteiger, Lisa, 2022. "The redistributive consequences of segregation and misperceptions," European Economic Review, Elsevier, vol. 144(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lisa Windsteiger, 2018. "Sorting in the Presence of Misperceptions," Working Papers tax-mpg-rps-2018-08, Max Planck Institute for Tax Law and Public Finance.
    2. Lisa Windsteiger, 2018. "Monopolistic Supply of Sorting, Inequality and Welfare," Working Papers tax-mpg-rps-2018-15, Max Planck Institute for Tax Law and Public Finance.
    3. Lisa Windsteiger, 2017. "The Redistributive Consequences of Segregation," Working Papers tax-mpg-rps-2017-12, Max Planck Institute for Tax Law and Public Finance.
    4. Windsteiger, Lisa, 2022. "The redistributive consequences of segregation and misperceptions," European Economic Review, Elsevier, vol. 144(C).
    5. Pangallo, Marco & Nadal, Jean-Pierre & Vignes, Annick, 2019. "Residential income segregation: A behavioral model of the housing market," Journal of Economic Behavior & Organization, Elsevier, vol. 159(C), pages 15-35.
    6. Bronsert, Anne-Kathrin & Glazer, Amihai & Konrad, Kai A., 2014. "Old Money, the Nouveau Riche and Brunhilde's Marriage Dilemma," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100385, Verein für Socialpolitik / German Economic Association.
    7. Gilat Levy & Ronny Razin, 2015. "Preferences over Equality in the Presence of Costly Income Sorting," American Economic Journal: Microeconomics, American Economic Association, vol. 7(2), pages 308-337, May.
    8. Mazali, Rogério & Rodrigues-Neto, José A., 2013. "Dress to impress: Brands as status symbols," Games and Economic Behavior, Elsevier, vol. 82(C), pages 103-131.
    9. Patrick Bayer & Fernando Ferreira & Robert McMillan, 2007. "A Unified Framework for Measuring Preferences for Schools and Neighborhoods," Journal of Political Economy, University of Chicago Press, vol. 115(4), pages 588-638, August.
    10. Martin D Munk & Till Nikolka & Panu Poutvaara, 2022. "International family migration and the dual-earner model [On the origin of gender roles: women and the plough]," Journal of Economic Geography, Oxford University Press, vol. 22(2), pages 263-287.
    11. Sam‐Ho Lee, 2023. "Theory of cultural capital: Productive use of an unproductive activity," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(2), pages 359-375, April.
    12. Friedrichsen, Jana, 2013. "Image concerns and the provision of quality," Discussion Papers, Research Unit: Market Behavior SP II 2013-211, WZB Berlin Social Science Center.
    13. Sigrid Roehrs & David Stadelmann, 2010. "Mobility and local income redistribution," Working Papers 2010/4, Institut d'Economia de Barcelona (IEB).
    14. Dennis N. Epple & Richard Romano, 2003. "Neighborhood Schools, Choice, and the Distribution of Educational Benefits," NBER Chapters, in: The Economics of School Choice, pages 227-286, National Bureau of Economic Research, Inc.
    15. Neumann, Uwe & Schaffner, Sandra & Eilers, Lea, 2019. "Bedeutung finanzieller Grundkompetenzen aus regionaler Perspektive. Gefördert durch die Dr. Josef und Brigitte Pauli-Stiftung," RWI Projektberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, number 222358.
    16. Calabrese, Stephen, 2024. "Household mobility and the political economy and welfare effects of local tax limits," Journal of Urban Economics, Elsevier, vol. 142(C).
    17. Jean Tirole & Roland Bénabou, 2006. "Incentives and Prosocial Behavior," American Economic Review, American Economic Association, vol. 96(5), pages 1652-1678, December.
    18. Nikolka, Till, 2018. "Family Return Migration," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181641, Verein für Socialpolitik / German Economic Association.
    19. Friedrichsen, Jana, 2018. "Signals Sell: Product Lines when Consumers Differ Both in Taste for Quality and Image Concern," Rationality and Competition Discussion Paper Series 70, CRC TRR 190 Rationality and Competition.
    20. Jorge Iván González, 2016. "Sentimientos y racionalidad en economía," Books, Universidad Externado de Colombia, Facultad de Economía, edition 1, number 75.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jpbect:v:23:y:2021:i:5:p:801-821. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/apettea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.