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Equity and efficiency in an overlapping generation model

Author

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  • ISAAC, Tanguy

    (Université catholique de Louvain, CORE, Belgium)

  • PIACQUADIO, Paolo Giovanni

    (Université catholique de Louvain, CORE, Belgium; Aix-Marseille University, AMSE, France)

Abstract

The paper addresses intergenerational and intragenerational equity in an overlapping generation economy. We aim at defining an egalitarian distribution of a constant stream of resources, when preferences are ordinal and non-comparable. We establish the impossibility of efficiently distributing resources while treating equally agents with same preferences that belong to possibly different generations. We thus propose an egalitarian criterion based on the equal-split guarantee: this requires all agents to find their assigned consumption bundle at least as desirable as the equal division of resources. Finally, we show how to construct a cardinalization of the preferences that enables well-being comparisons: this allows defining the family of critical-level utilitarian orderings that top-rank the egalitarian solution.

Suggested Citation

  • ISAAC, Tanguy & PIACQUADIO, Paolo Giovanni, 2012. "Equity and efficiency in an overlapping generation model," LIDAM Discussion Papers CORE 2012059, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2012059
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    References listed on IDEAS

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    1. Fleurbaey,Marc & Maniquet,François, 2011. "A Theory of Fairness and Social Welfare," Cambridge Books, Cambridge University Press, number 9780521715348, October.
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    11. Piacquadio, Paolo G., 2014. "Intergenerational egalitarianism," Journal of Economic Theory, Elsevier, vol. 153(C), pages 117-127.
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    14. Tomoichi Shinotsuka & Koichi Suga & Kotaro Suzumura & Koichi Tadenuma, 2007. "Equity and Efficiency in Overlapping Generations Economies," International Economic Association Series, in: John Roemer & Kotaro Suzumura (ed.), Intergenerational Equity and Sustainability, chapter 2, pages 20-35, Palgrave Macmillan.
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    Cited by:

    1. Piacquadio, Paolo G., 2020. "The ethics of intergenerational risk," Journal of Economic Theory, Elsevier, vol. 186(C).
    2. Emeline Bezin, 2019. "The economics of Green consumption, cultural transmission and sustainable technological change," PSE-Ecole d'économie de Paris (Postprint) halshs-02087970, HAL.
    3. Piacquadio, Paolo G., 2014. "Intergenerational egalitarianism," Journal of Economic Theory, Elsevier, vol. 153(C), pages 117-127.
    4. Emeline Bezin, 2019. "The economics of Green consumption, cultural transmission and sustainable technological change," Post-Print halshs-02087970, HAL.
    5. Bezin, Emeline, 2019. "The economics of green consumption, cultural transmission and sustainable technological change," Journal of Economic Theory, Elsevier, vol. 181(C), pages 497-546.

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    More about this item

    Keywords

    intergenerational equity; intragenerational equity; overlapping generation model; no-envy; equal-split guarantee; allocation rules; utilitarian welfare function;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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