IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v86y2013icp1-9.html
   My bibliography  Save this article

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

Author

Listed:
  • Sorger, Gerhard
  • Stark, Oded

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.

Suggested Citation

  • Sorger, Gerhard & Stark, Oded, 2013. "Income redistribution going awry: The reversal power of the concern for relative deprivation," Journal of Economic Behavior & Organization, Elsevier, vol. 86(C), pages 1-9.
    • Handle: RePEc:eee:jeborg:v:86:y:2013:i:c:p:1-9
    DOI: 10.1016/j.jebo.2012.10.011
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268112002168
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jebo.2012.10.011?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
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Stark, Oded & Fan, C. Simon, 2011. "Migration for degrading work as an escape from humiliation," Journal of Economic Behavior & Organization, Elsevier, vol. 77(3), pages 241-247, March.
    2. AndrewE. Clark & Claudia Senik, 2010. "Who Compares to Whom? The Anatomy of Income Comparisons in Europe," Economic Journal, Royal Economic Society, vol. 120(544), pages 573-594, May.
    3. Lambert, Peter J & Aronson, J Richard, 1993. "Inequality Decomposition Analysis and the Gini Coefficient Revisited," Economic Journal, Royal Economic Society, vol. 103(420), pages 1221-1227, September.
    4. Bruno S. Frey, 2018. "Economics of Happiness," SpringerBriefs in Economics, Springer, number 978-3-319-75807-7, October.
    5. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 963-1002.
    6. Weymark, John A., 1981. "Generalized gini inequality indices," Mathematical Social Sciences, Elsevier, vol. 1(4), pages 409-430, August.
    7. Oded Stark & Walter Hyll & Yong Wang, 2012. "Endogenous Selection of Comparison Groups, Human Capital Formation, and Tax Policy," Economica, London School of Economics and Political Science, vol. 79(313), pages 62-75, January.
    8. Shorrocks, Anthony F, 1984. "Inequality Decomposition by Population Subgroups," Econometrica, Econometric Society, vol. 52(6), pages 1369-1385, November.
    9. Blanchflower, David G. & Oswald, Andrew J., 2008. "Hypertension and happiness across nations," Journal of Health Economics, Elsevier, vol. 27(2), pages 218-233, March.
    10. David Andolfatto, 2002. "A Theory of Inalienable Property Rights," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 382-393, April.
    11. C. Simon Fan & Oded Stark, 2011. "A Theory Of Migration As A Response To Occupational Stigma," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(2), pages 549-571, May.
    12. Ebert, Udo, 1987. "Size and distribution of incomes as determinants of social welfare," Journal of Economic Theory, Elsevier, vol. 41(1), pages 23-33, February.
    13. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
    14. Bossert, Walter & D'Ambrosio, Conchita, 2006. "Reference groups and individual deprivation," Economics Letters, Elsevier, vol. 90(3), pages 421-426, March.
    15. Shlomo Yitzhaki, 1979. "Relative Deprivation and the Gini Coefficient," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(2), pages 321-324.
    16. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    17. Daniel J. Zizzo & Andrew J. Oswald, 2001. "Are People Willing to Pay to Reduce Others'Incomes?," Annals of Economics and Statistics, GENES, issue 63-64, pages 39-65.
    18. repec:hal:pseose:halshs-00754447 is not listed on IDEAS
    19. Ebert, Udo, 1984. "Measures of distance between income distributions," Journal of Economic Theory, Elsevier, vol. 32(2), pages 266-274, April.
    20. Shorrocks, A F, 1980. "The Class of Additively Decomposable Inequality Measures," Econometrica, Econometric Society, vol. 48(3), pages 613-625, April.
    21. Frey, Bruno S & Stutzer, Alois, 2000. "Happiness, Economy and Institutions," Economic Journal, Royal Economic Society, vol. 110(466), pages 918-938, October.
    22. Oded Stark & Walter Hyll, 2011. "On the Economic Architecture of the Workplace: Repercussions of Social Comparisons among Heterogeneous Workers," Journal of Labor Economics, University of Chicago Press, vol. 29(2), pages 349-375.
    23. Foster, James E. & Shorrocks, Anthony F., 1988. "Inequality and poverty orderings," European Economic Review, Elsevier, vol. 32(2-3), pages 654-661, March.
    24. Stark, Oded & Taylor, J Edward, 1991. "Migration Incentives, Migration Types: The Role of Relative Deprivation," Economic Journal, Royal Economic Society, vol. 101(408), pages 1163-1178, September.
    25. repec:adr:anecst:y:2001:i:63-64:p:03 is not listed on IDEAS
    26. Foster, James E., 1983. "An axiomatic characterization of the Theil measure of income inequality," Journal of Economic Theory, Elsevier, vol. 31(1), pages 105-121, October.
    27. Donaldson, David & Weymark, John A., 1980. "A single-parameter generalization of the Gini indices of inequality," Journal of Economic Theory, Elsevier, vol. 22(1), pages 67-86, February.
    28. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198281931.
    29. Chakravarty, Satya R, 1988. "Extended Gini Indices of Inequality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(1), pages 147-156, February.
    30. Fliessbach, Klaus & Weber, Bernd & Trautner, P. & Dohmen, Thomas J. & Sunde, Uwe & Elger, C. E. & Falk, Armin, 2007. "Social comparison affects reward-related brain activity in the human ventral striatum," Munich Reprints in Economics 20362, University of Munich, Department of Economics.
    31. Bossert, Walter, 1990. "An axiomatization of the single-series Ginis," Journal of Economic Theory, Elsevier, vol. 50(1), pages 82-92, February.
    32. Blackorby, Charles & Donaldson, David, 1980. "A Theoretical Treatment of Indices of Absolute Inequality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 107-136, February.
    33. Blackorby, Charles & Donaldson, David, 1978. "Measures of relative equality and their meaning in terms of social welfare," Journal of Economic Theory, Elsevier, vol. 18(1), pages 59-80, June.
    34. Serge-Christophe Kolm, 1977. "Multidimensional Egalitarianisms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 91(1), pages 1-13.
    35. John D. Hey & Peter J. Lambert, 1980. "Relative Deprivation and the Gini Coefficient: Comment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 95(3), pages 567-573.
    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. Oded Stark & Marcin Jakubek, 2016. "Can a Concern for Status Reconcile Diverse Social Welfare Programs?," Research on Economic Inequality, in: Inequality after the 20th Century: Papers from the Sixth ECINEQ Meeting, volume 24, pages 235-246, Emerald Group Publishing Limited.
    2. Stark, Oded & Kosiorowski, Grzegorz, 2024. "An optimal allocation of asylum seekers," Journal of Economic Behavior & Organization, Elsevier, vol. 220(C), pages 1-11.
    3. Stark, Oded, 2013. "On the Economics of Others," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 5, pages 709-715.
    4. Bing Xu & Maxwell Pak, 2021. "Child-raising cost and fertility from a contest perspective," Public Choice, Springer, vol. 186(1), pages 9-28, January.
    5. Oded Stark & Jan Fałkowski, 2019. "On structural change, the social stress of a farming population, and the political economy of farm support," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 27(1), pages 201-222, January.
    6. Stark, Oded & Bielawski, Jakub & Jakubek, Marcin, 2015. "The impact of the assimilation of migrants on the well-being of native inhabitants: A theory," Journal of Economic Behavior & Organization, Elsevier, vol. 111(C), pages 71-78.
    7. Stark, Oded & Jakubek, Marcin & Falniowski, Fryderyk, 2014. "Reconciling the Rawlsian and the utilitarian approaches to the maximization of social welfare," Economics Letters, Elsevier, vol. 122(3), pages 439-444.
    8. Oded Stark & Marcin Jakubek & Martyna Kobus, 2015. "A bitter choice turned sweet: How acknowledging individuals’ concern at having a low relative income serves to align utilitarianism and egalitarianism," Journal of Evolutionary Economics, Springer, vol. 25(3), pages 541-557, July.
    9. Oded Stark, 2015. "Comment: 'Neighbourhood attachment in ethnically diverse areas: The role of interethnic ties'," Urban Studies, Urban Studies Journal Limited, vol. 52(5), pages 980-983, April.

    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. Oded Stark & Fryderyk Falniowski & Marcin Jakubek, 2017. "Consensus Income Distribution," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(4), pages 899-911, December.
    2. Oded Stark & Marcin Jakubek & Martyna Kobus, 2015. "A bitter choice turned sweet: How acknowledging individuals’ concern at having a low relative income serves to align utilitarianism and egalitarianism," Journal of Evolutionary Economics, Springer, vol. 25(3), pages 541-557, July.
    3. Stark, Oded, 2013. "Stressful Integration," European Economic Review, Elsevier, vol. 63(C), pages 1-9.
    4. Oded Stark & Marcin Jakubek, 2016. "Can a Concern for Status Reconcile Diverse Social Welfare Programs?," Research on Economic Inequality, in: Inequality after the 20th Century: Papers from the Sixth ECINEQ Meeting, volume 24, pages 235-246, Emerald Group Publishing Limited.
    5. Oded Stark, 2017. "Migration when Social Preferences are Ordinal: Steady-state Population Distribution and Social Welfare," Economica, London School of Economics and Political Science, vol. 84(336), pages 647-666, October.
    6. Stark, Oded & Kobus, Martyna & Jakubek, Marcin, 2012. "A concern about low relative income, and the alignment of utilitarianism with egalitarianism," Economics Letters, Elsevier, vol. 114(3), pages 235-238.
    7. Stark, Oded & Zawojska, Ewa & Kohler, Wilhelm & Szczygielski, Krzysztof, 2018. "An adverse social welfare effect of a doubly gainful trade," Journal of Development Economics, Elsevier, vol. 135(C), pages 77-84.
    8. Oded Stark & Marcin Jakubek & Krzysztof Szczygielski, 2020. "The social preferences of the native inhabitants, and the decision how many asylum seekers to admit," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(1), pages 133-152, February.
    9. Satya R. Chakravarty & Pietro Muliere, 2003. "Welfare indicators: A review and new perspectives. 1. Measurement of inequality," Metron - International Journal of Statistics, Dipartimento di Statistica, Probabilità e Statistiche Applicate - University of Rome, vol. 0(3), pages 457-497.
    10. Satya Chakravarty, 2007. "A deprivation-based axiomatic characterization of the absolute Bonferroni index of inequality," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 5(3), pages 339-351, December.
    11. Stark, Oded & Jakubek, Marcin & Falniowski, Fryderyk, 2014. "Reconciling the Rawlsian and the utilitarian approaches to the maximization of social welfare," Economics Letters, Elsevier, vol. 122(3), pages 439-444.
    12. repec:ebl:ecbull:v:3:y:2003:i:19:p:1-16 is not listed on IDEAS
    13. Oded STARK & Wiktor Budzinski, 2019. "Repercussions of Negatively Selective Migration for the Behavior of Non-Migrants when Preferences Are Social," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 85(2), pages 165-179, June.
    14. Jean-Yves Duclos & Abdelkrim Araar, 2003. "An Atkinson-Gini family of social evaluation functions," Economics Bulletin, AccessEcon, vol. 3(19), pages 1-16.
    15. Stéphane Mussard & Françoise Seyte & Michel Terraza, 2006. "La décomposition de l’indicateur de Gini en sous-groupes : une revue de la littérature," Cahiers de recherche 06-11, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    16. Ebert, Udo, 2010. "The decomposition of inequality reconsidered: Weakly decomposable measures," Mathematical Social Sciences, Elsevier, vol. 60(2), pages 94-103, September.
    17. Chakravarty, Satya R. & Sarkar, Palash, 2022. "A synthesis of local and effective tax progressivity measurement," MPRA Paper 115180, University Library of Munich, Germany.
    18. Oded Stark & Franz Rendl & Marcin Jakubek, 2012. "The merger of populations, the incidence of marriages, and aggregate unhappiness," Journal of Evolutionary Economics, Springer, vol. 22(2), pages 331-344, April.
    19. Eva Camacho-Cuena & Tibor Neugebauer & Christian Seidl, 2007. "Leaky Buckets Versus Compensating Justice: An Experimental Investigation," Working Papers 74, ECINEQ, Society for the Study of Economic Inequality.
    20. Jean–Yves Duclos & Phillipe Grégoire, 2002. "Absolute and Relative Deprivation and the Measurement of Poverty," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(4), pages 471-492, December.
    21. Blanchflower, David G & Oswald, Andrew, 2011. "International Happiness," CAGE Online Working Paper Series 39, Competitive Advantage in the Global Economy (CAGE).

    More about this item

    Keywords

    A rank-preserving inequality-narrowing transfer; The Gini coefficient; Low relative income; Relative deprivation; Exacerbated inequality;
    All these keywords.

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

    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:eee:jeborg:v:86:y:2013:i:c:p:1-9. 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

    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.