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A quantitative method for benchmarking fair income distribution

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  • Thitithep Sitthiyot
  • Kanyarat Holasut

Abstract

Concern about income inequality has become prominent in public discourse around the world. However, studies in behavioral economics and psychology have consistently shown that people prefer not equal but fair income distributions. Thus, finding a benchmark that could be used to measure fair income distribution across countries is a theoretical and practical challenge. Here a method for benchmarking fair income distribution is introduced. The benchmark is constructed based on the concepts of procedural justice, distributive justice, and authority's power in professional sports where it is widely agreed as an international norm that the allocations of athlete's salary are outcomes of fair rules, individual and/or team performance, and luck in line with no-envy principle of fair allocation. Using the World Bank data, this study demonstrates how the benchmark could be used to quantitatively gauge whether, for a given value of the Gini index, the income shares by quintile of a country are the fair shares or not, and if not, what fair income shares by quintile of that country should be. Knowing this could be useful for those involved in setting targets for the Gini index and the fair income shares that are appropriate for the context of each country before formulating policies toward achieving the Sustainable Development Goal 10 and other SDGs.

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  • Thitithep Sitthiyot & Kanyarat Holasut, 2022. "A quantitative method for benchmarking fair income distribution," Papers 2202.00917, arXiv.org.
  • Handle: RePEc:arx:papers:2202.00917
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    File URL: http://arxiv.org/pdf/2202.00917
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    References listed on IDEAS

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    1. Ingvild Almås & Alexander W. Cappelen & Bertil Tungodden, 2020. "Cutthroat Capitalism versus Cuddly Socialism: Are Americans More Meritocratic and Efficiency-Seeking than Scandinavians?," Journal of Political Economy, University of Chicago Press, vol. 128(5), pages 1753-1788.
    2. Kimbrough, Erik O. & Sheremeta, Roman M. & Shields, Timothy W., 2014. "When parity promotes peace: Resolving conflict between asymmetric agents," Journal of Economic Behavior & Organization, Elsevier, vol. 99(C), pages 96-108.
    3. repec:cup:judgdm:v:5:y:2010:i:2:p:83-101 is not listed on IDEAS
    4. Ken Mayhew & Samuel Wills, 2019. "Inequality: an assessment," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 35(3), pages 351-367.
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    Cited by:

    1. Thitithep Sitthiyot & Kanyarat Holasut, 2024. "Quantifying fair income distribution in Thailand," Papers 2404.09629, arXiv.org.

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