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Equity and Efficiency When Needs Differ

Author

Listed:
  • Kristoffer Berg
  • Morten Håvarstein
  • Paolo Piacquadio
  • Paolo Giovanni Piacquadio

Abstract

There is no consensus on how to measure social welfare and inequality when households have different needs. As we show, a dilemma emerges between holding households responsible for their needs or compensating them. This dilemma is of first-order importance for social welfare, but generally plays a minor role in the measurement of inequality. To address this impasse, we introduce partial compensation. Our axiomatic characterizations reveal novel families of welfare criteria and, with the extension to multidimensional commodity spaces, provide ready-to-use criteria for the analysis of redistributive policies.

Suggested Citation

  • Kristoffer Berg & Morten Håvarstein & Paolo Piacquadio & Paolo Giovanni Piacquadio, 2024. "Equity and Efficiency When Needs Differ," CESifo Working Paper Series 11310, CESifo.
    • Handle: RePEc:ces:ceswps:_11310
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp11310.pdf
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    References listed on IDEAS

    as
    1. Aaberge, Rolf & Langørgen, Audun & Mogstad, Magne & Østensen, Marit, 2008. "The Impact of Local Public Services and Geographical Cost of Living Differences on Poverty Estimates," IZA Discussion Papers 3686, Institute of Labor Economics (IZA).
    2. Aaberge, Rolf & Bhuller, Manudeep & Langørgen, Audun & Mogstad, Magne, 2010. "The distributional impact of public services when needs differ," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 549-562, October.
    3. repec:bla:revinw:v:44:y:1998:i:4:p:565-69 is not listed on IDEAS
    4. Rolf Aaberge & Ingrid Melby, 1998. "The Sensitivity Of Income Inequality To Choice Of Equivalence Scales," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(4), pages 565-569, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    household needs; transfer principles; equity-efficiency trade-off; welfare criteria;
    All these keywords.

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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