Fairness and Redistribution- the Case of Latin American Countries

Following the suggestion of modern egalitarians, the model proposed by Alesina & Angeletos (2005) sets up a fairness rule based on composition of equality, designated by the weights of effort and luck. However, empirical evidence for a set of Latin American countries suggests that, unlike developed countries, these societies do not have a well-established view about the role of merit on economic outcome. Therefore, this paper proposes a theoretical framework based on a new fairness rule, namely the perception that the country does not offer everyone with the same opportunities. The new parameterization leads to a unique and stable equilibrium, characterized by an intermediate level of taxation between the equilibria of the "U.S." and of "Europe".