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Value Preserving Welfare Weights for Social Optimization Problems

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  • Alexis Anagnostopoulos
  • Eva Carceles-Poveda
  • Yair Tauman

Abstract

We propose endogenous, value preserving (VP) welfare weights as an alternative to equal weights utilitarianism. VP weights require that the contribution of an agent's endowments to social welfare is proportional to the contribution of the final allocation to his welfare. Under three axioms, the per unit contribution of a good to welfare is shown to equal the gradient of the welfare function. VP weights coincide with Negishi weights in frictionless environments but prescribe redistribution toward a good's owner when the good's social value exceeds its market value. When ability is treated as an endowment, VP weights reward ability and effort.
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  • Alexis Anagnostopoulos & Eva Carceles-Poveda & Yair Tauman, 2016. "Value Preserving Welfare Weights for Social Optimization Problems," Department of Economics Working Papers 16-06, Stony Brook University, Department of Economics.
    • Handle: RePEc:nys:sunysb:16-06
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