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Distributional Neutral Welfare Ranking-Extending Pareto Principle

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  • Marjit, Sugata
  • Sarkar, Sandip

Abstract

The well known Pareto criterion used in the context of efficiency and welfare has to do with absolute changes whereas in every domain of economic behavior inequality or relative changes has become a major concern. We propose an inequality-preserving or distribution neutral Pareto criterion-the strong Pareto superior or SPS allocation which preserves the initial distribution and makes everyone better off. Our main result is that whenever there is a gain in the aggregate value of the relevant attribute, there exists a unique counterfactual allocation which is SPS.

Suggested Citation

  • Marjit, Sugata & Sarkar, Sandip, 2016. "Distributional Neutral Welfare Ranking-Extending Pareto Principle," MPRA Paper 74928, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:74928
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    References listed on IDEAS

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    1. Mandler, Michael, 1999. "Simple Pareto-Improving Policies," Journal of Economic Theory, Elsevier, vol. 84(1), pages 120-133, January.
    2. Kolm, Serge-Christophe, 1976. "Unequal inequalities. II," Journal of Economic Theory, Elsevier, vol. 13(1), pages 82-111, August.
    3. Kolm, Serge-Christophe, 1976. "Unequal inequalities. I," Journal of Economic Theory, Elsevier, vol. 12(3), pages 416-442, June.
    4. Stiglitz, Joseph E., 1987. "Pareto efficient and optimal taxation and the new new welfare economics," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 15, pages 991-1042, Elsevier.
    5. Richard Cornes & Todd Sandler, 2000. "Pareto‐Improving Redistribution and Pure Public Goods," German Economic Review, Verein für Socialpolitik, vol. 1(2), pages 169-186, May.
    6. T. de Scitovszky, 1941. "A Note on Welfare Propositions in Economics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 9(1), pages 77-88.
    7. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    8. Anthony B. Atkinson & Joseph E. Stiglitz, 2015. "Lectures on Public Economics Updated edition," Economics Books, Princeton University Press, edition 2, number 10493.
    9. Pickett, Kate E. & Wilkinson, Richard G., 2015. "Income inequality and health: A causal review," Social Science & Medicine, Elsevier, vol. 128(C), pages 316-326.
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    Cited by:

    1. Sugata Marjit & Anjan Mukherji & Sandip Sarkar, 2018. "Pareto Efficiency, Inequality and Distribution Neutral Fiscal Policy - An Overview," Discussion Papers Series 590, School of Economics, University of Queensland, Australia.
    2. Sugata Marjit & Lei Yang, 2017. "Trade, Inequality and Distribution-Neutral Fiscal Policy - An Elementary Framework," CESifo Working Paper Series 6474, CESifo.
    3. Santhanakrishnan, Deepika, 2020. "An interim note on SPS allocation," MPRA Paper 102784, University Library of Munich, Germany.
    4. Mr. Sanjeev Gupta & Sugata Marjit & Sandip Sarkar, 2018. "An Application of Distribution-Neutral Fiscal Policy," IMF Working Papers 2018/012, International Monetary Fund.

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    More about this item

    Keywords

    Strong Pareto Superiority; Inequality; Trade;
    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
    • F10 - International Economics - - Trade - - - General

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