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Income redistribution going awry: The reversal power of the concern for relative deprivation

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  • Stark, Oded
  • Sorger, Gerhard

Abstract

We demonstrate that a rank-preserving transfer from a richer individual to a poorer individual can exacerbate income inequality (when inequality is measured by the Gini coefficient). This happens when individuals' preferences depend negatively not only on work time (effort) but also on low relative income. It is rigorously shown that the set of preference profiles that gives rise to this perverse effect of a transfer on inequality is a non-empty open subset of all preference profiles. A robust example illustrates this result.

Suggested Citation

  • Stark, Oded & Sorger, Gerhard, 2012. "Income redistribution going awry: The reversal power of the concern for relative deprivation," University of Tübingen Working Papers in Business and Economics 47, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
    • Handle: RePEc:zbw:tuewef:47
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    as
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Stark, Oded & Kosiorowski, Grzegorz, 2024. "An optimal allocation of asylum seekers," Journal of Economic Behavior & Organization, Elsevier, vol. 220(C), pages 1-11.
    2. Oded Stark & Jan Fałkowski, 2019. "On structural change, the social stress of a farming population, and the political economy of farm support," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 27(1), pages 201-222, January.
    3. Oded Stark & Marcin Jakubek, 2016. "Can a Concern for Status Reconcile Diverse Social Welfare Programs?," Research on Economic Inequality, in: Inequality after the 20th Century: Papers from the Sixth ECINEQ Meeting, volume 24, pages 235-246, Emerald Group Publishing Limited.
    4. Stark, Oded & Jakubek, Marcin & Falniowski, Fryderyk, 2014. "Reconciling the Rawlsian and the utilitarian approaches to the maximization of social welfare," Economics Letters, Elsevier, vol. 122(3), pages 439-444.
    5. Oded Stark & Marcin Jakubek & Martyna Kobus, 2015. "A bitter choice turned sweet: How acknowledging individuals’ concern at having a low relative income serves to align utilitarianism and egalitarianism," Journal of Evolutionary Economics, Springer, vol. 25(3), pages 541-557, July.
    6. Stark, Oded & Bielawski, Jakub & Jakubek, Marcin, 2015. "The impact of the assimilation of migrants on the well-being of native inhabitants: A theory," Journal of Economic Behavior & Organization, Elsevier, vol. 111(C), pages 71-78.
    7. Stark, Oded, 2013. "On the Economics of Others," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 5, pages 709-715.
    8. Bing Xu & Maxwell Pak, 2021. "Child-raising cost and fertility from a contest perspective," Public Choice, Springer, vol. 186(1), pages 9-28, January.
    9. Oded Stark, 2015. "Comment: 'Neighbourhood attachment in ethnically diverse areas: The role of interethnic ties'," Urban Studies, Urban Studies Journal Limited, vol. 52(5), pages 980-983, April.

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    More about this item

    Keywords

    A rank-preserving inequality-narrowing transfer; The Gini coefficient; Low relative income; Relative deprivation; Exacerbated inequality;
    All these keywords.

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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