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Income Inequality VS. Standard of Living Inequality

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  • Uriel Spiegel

Abstract

This paper distinguishes between income inequality and standard of living inequality. It examines the case where the utility of individuals is positively affected by a private good and a public good. We show that a wealthy individual will bear the financial burden of financing the public good, which increases the utility of the poor and reduces utility inequality. Moreover, at certain levels of inequality in income, it turns out that an individual whose share in income has decreased will not experience a reduction in utility as a result of the reduction in income. This may explain why within certain ranges of income inequality there is no attempt on the part of either the wealthy or the poor to struggle for income redistribution.

Suggested Citation

  • Uriel Spiegel, 2008. "Income Inequality VS. Standard of Living Inequality," The American Economist, Sage Publications, vol. 52(1), pages 49-57, March.
    • Handle: RePEc:sae:amerec:v:52:y:2008:i:1:p:49-57
    DOI: 10.1177/056943450805200104
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    References listed on IDEAS

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    1. Itaya, Jun-ichi & de Meza, David & Myles, Gareth D., 1997. "In praise of inequality: public good provision and income distribution," Economics Letters, Elsevier, vol. 57(3), pages 289-296, December.
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