Being up Front about Income Inequality

This paper studies universal provision of information about the income inequality involved in the creation of a good as a potential means of moderating society-level income inequality. We show that supplying inequality information to consumers in competitive markets leads to a reduction in overall income inequality, as long as a portion of the population are extreme-inequality averse: they are willing to pay more for goods whose production involves less extreme income inequality. Calibrating the model with recent experimental evidence on these consumer attitudes suggests that the reduction may be significant. Moreover, we show that the equilibrium under information provision is socially efficient, whereas efficiency is lost in the absence of information. Possibilities for implementation are also discussed.