DECENTRALIZED INCOME REDISTRIBUTION RECONSIDERED

In theory, a state could redistribute income at a lower cost to its taxpayers than if the national government handled it. Part of the cost is exported out of state when federal tax revenues generated by the state fall as money incomes are reduced by additional redistribution. Simulations combining labor supply and migration responses show that for some reasonable parameter values enough of the cost is exported so that states do face lower costs of redistribution. Hence, the federal tax system provides at least a partial offset to the well-known externalities generated by local redistribution.     

The theory of justice

This article presents the general structure of the question justice in society, its three polar cases which relate to the benefits from the human resources, their difficulties with Pareto-efficiency, and the solutions of these dilemma, notably for the central case where individuals a priori own only their consumptive capacities. This solution is a multidimensional maximin which leads to super-equity (no individual prefers any average of the individuals' allocations to his own). The properties of efficient super-equity are then shown: limits to the dispersion of incomes and relations with equal income, preference to all equal allocations, determination of the redistributive tax-subsidies, relations with other principles. Finally, the efficient implementation of standard ethical positions consists of the equalizing redistribution of incomes earned during a fixed duration while the other earned incomes are untaxed.     

Do Minimum Wages Fight Poverty?

We present evidence on the effects of minimum wages on family incomes. The results indicate that minimum wages increase both the probability that poor families escape poverty and the probability that previously nonpoor families fall into poverty. The estimated increase in the flow into poverty is larger, although this difference is not statistically significant. We also find that minimum wages tend to boost the incomes of poor families that remain below the poverty line. On net, the various trade-offs created by minimum wage increases more closely resemble income redistribution among low-income families than income redistribution from high- to low-income families.     

“Left Behind?” Financialization and Income Inequality Between the Affluent,Middle Class,and The Poor

There is increasing scholarly evidence that financialization has contributed to rising income inequality, especially by concentrating income among the affluent and rich. There is less empirical research examining who is losing out to the affluent. This paper fills this gap by examining how three measures of financialization (finance, insurance, and real estate or FIRE employment; credit expansion; and financial crises) affect upper-tail (measured as the ratio between the 90th and 50th income percentiles) and lower-tail (measured as the ratio between the 50th and 10th income percentiles) income inequality. Using concepts from economic sociology and the social stratification literature, I develop a perspective that links financialization to income inequality by creating more unequal market incomes while simultaneously reducing redistribution and social transfers. I analyze disposable household income data (after taxes and transfers) from the Luxembourg Income Study (LIS) and other public sources like the OECD from 16 affluent nations between the years 1981 and 2011, and I use an unbalanced panel design due to LIS data coverage. I find that the relative incomes of both the middle class and the poor are hurt by financialization (strongest evidence tied to FIRE employment); however, relative incomes of the poor are especially sensitive to financialization.     

Liberty and distribution: Macrojustice from social freedom

Social freedom, the absence of forceful interference and the central social ethical principle of the modern world, does not imply full self-ownership, as it is classically believed, without a particular interpretation or problematic extra assumptions. It can in fact admit a notable redistribution, but, along with a few facts, it requires most of it to have a particular structure. This structure is equal labour income equalization, an equal redistribution of the incomes that the individuals endowed with different capacities can earn with the same notional equalization labour which represents the degree of community, redistribution, solidarity and reciprocity in the considered society.     

TAX POLICY AND INCOME INEQUALITY IN THE UNITED STATES, 1979–2007

This paper assesses the effects of U.S. tax policy reforms on inequality over around three decades, from 1979 to 2007. It applies a new method for decomposing changes in government redistribution into (1) a direct policy effect resulting from policy changes and (2) the effects of changing market incomes. Over the period as a whole, the tax policy changes increased income inequality by pushing up the income share of high‐income earners (the top 20%). (JEL H23, H31, H53, P16)     

Targeting disadvantage in agriculture

The effectiveness of the main policy instrument targeting support at farmers in disadvantaged areas of the UK from 1976 to 2000 (the Hill Livestock Compensatory Allowance Scheme) is evaluated for Northern Ireland, using recursive linear programming models and input–output analysis. Capital, income and employment effects of the Scheme in its latter years are estimated and assessed against declared policy objectives. It is estimated that average farm cash incomes would have been between 17 and 31 per cent lower in the absence of HLCA payments, while farmer net worth would have fallen by approximately 1 per cent annually. In aggregate, some 1000 jobs were sustained by the Scheme and incomes and profits in the region were boosted by £9 million each year. The main economic effect arising from the introduction of a successor area-based subsidy, will be a redistribution of payments from farms with relatively high stocking rates (predominantly larger units) to those operating more extensively (mostly smaller, part-time farms).     

Effects of Alternative Policies on Income Redistribution: Evidence from Brazil

Despite recent successes, Brazilian income (cash) transfer policies remain controversial, and alternative approaches to income redistribution are being actively considered. This article contributes to this debate, analysing the effects of several alternative policies for income redistribution in the Brazilian economy using a computable general equilibrium model. Simulations were conducted consistent with the following policies: direct transfer of income, reduction of taxes, and incentives to agricultural exports. The results suggest that transfer of income is the most effective in promoting redistribution of income, with a positive impact on the level of welfare of the poorest households.     

THE EFFECT OF DIRECT DEMOCRACY ON INCOME REDISTRIBUTION: EVIDENCE FOR SWITZERLAND

In political economics, the impact of institutions on income redistribution is mainly studied by comparing different forms of representative democracy. In this article, we analyze the influence of direct democratic institutions on redistribution first focusing on welfare and nonwelfare spending using yearly panel data for Swiss cantons. Then, we estimate a model, which explains the determinants of actually achieved redistribution measured by Gini coefficients. While our results indicate that less public funds are used to redistribute income, inequality is not reduced to a lesser extent in direct than in representative democracies for a given initial income distribution. (JEL D7, D78, I30, H75, H11)     

Taking empirical studies seriously: the principle of concentration and the measurement of welfare and inequality

The paper investigates the implications of empirical studies by Amiel and Cowell (J Public Econ 47:3–26, 1992) of the public’s attitude towards inequality. It demonstrates that the value judgments concerning the redistribution of income which have been revealed in these studies can be represented by the principle of concentration. A concentration is a redistribution of income which reduces the distance between each income and the average income in the same proportion. Imposing this principle and some other basic properties the paper characterizes several families of social welfare orderings which imply generalized Atkinson inequality measures. They do not necessarily satisfy the principle of progressive transfers. I thank two anonymous referees for helpful comments.     

Minimal rights based solidarity

In a model where individuals with different levels of skills exert different levels of effort, we propose to use individuals’ minimal rights to divide an extra amount of income generated by a change in the skill profile. Priority is given to individuals with a positive minimal right which ensures that the way redistribution is performed depends on the total sum of income available in society. We characterize two families of minimal rights based Egalitarian mechanisms. One family guarantees each individual her claim when claims are feasible. The other family guarantees a non-negative income after redistribution for all individuals.     

Gender Differences in Personal Income and Financial Risk Tolerance: How Much of a Connection?

Prior research indicates that relative to men, women generally have lower incomes and typically are more risk averse. In a sample of the clientele of financial planners, men had higher personal incomes and exhibited greater financial risk tolerance, which is consistent with previous studies. The authors' objective was to determine how much of the gender difference in income could be explained by risk tolerance. Results indicate that risk tolerance can explain some of the variation in earnings between women and men but that it is not a primary reason for the wage gap.     

Social welfare functions with a reference income

A foundation of social welfare functions is considered with a given reference income (or utility): relative and absolute invariance of the underlying welfare ordering are defined to hold for societies with either all members having incomes below the reference income or all members having incomes above the reference income. These conditions, alongside standard properties of a social preference relation, provide reference income dependent extensions of traditional classes of welfare functions. Dalton’s principle of positive transfers is incorporated, under which relative invariance leads to a class of piecewise (rank-)linear welfare functions, including the class of generalized Gini social welfare functions as a special case. To ensure quasi-concavity a new preference condition is proposed, which has the interpretation of aversion to income dropping below the reference income.     

Pareto models for top incomes and wealth

Top incomes are often related to Pareto distribution. To date, economists have mostly used Pareto Type I distribution to model the upper tail of income and wealth distribution. It is a parametric distribution, with interesting properties, that can be easily linked to economic theory. In this paper, we first show that modeling top incomes with Pareto Type I distribution can lead to biased estimation of inequality, even with millions of observations. Then, we show that the Generalized Pareto distribution and, even more, the Extended Pareto distribution, are much less sensitive to the choice of the threshold. Thus, they can provide more reliable results. We discuss different types of bias that could be encountered in empirical studies and, we provide some guidance for practice. To illustrate, two applications are investigated, on the distribution of income in South Africa in 2012 and on the distribution of wealth in the United States in 2013.

     

Farm Household Incomes: Perceptions and Statistics

Although concern with the incomes of the agricultural community is at the centre of agricultural policy in Europe, and a major reason why reform of the CAP has been opposed, reliable statistics on the incomes of farmers and their households are scarce. Policy has been built on assumptions about incomes in agriculture that have remained largely unsubstantiated by official statistics. Recently, information has been generated by Eurostat about the aggregate disposable income of the agricultural household sector in EU countries which, though falling short of being comprehensive, causes some of these assumptions to be seriously challenged. By providing policymakers with better information, and indicating where more detailed statistics are needed, the quality of policy decisions should be improved.     

How changes in price and salary affect economic satisfaction: Information integration models and inference processes

Preliminary studies demonstrated the interactive effects of changes in salary and inflation rate on feelings of personal satisfaction, and showed that the effects of price increases in different cost categories could he described by a weighted average model. Participants in the main study were presented with varying hypothetical economic situations which included salary changes (raises) as well as specific price changes. A ratio model was found to describe how raise levels and price increases were combined. The rationality of this model was discussed in terms of how variations in price and income would affect the amount of a given commodity that could he purchased. On some trials only partial information was presented. Low ratings of personal satisfaction were produced when information about raises was missing, and high ratings were produced when information about price increases was missing. These results were discussed in terms of inferences people make when a key source of information is missing.     

Redistributing wealth to families: the advantages of the MYRIADE model

This study aims to shed light on the main characteristics of the French system for redistributing wealth to families through tax revenues and social transfers. For the purposes of this exercise, the authors used the MYRIADE microsimulation model, which covers most of the redistribution system, though it is limited to monetary flows such as family benefits, housing allowances, minimum social welfare payments, income tax, and tax on furnished accommodation. The authors used a particular methodology to highlight the way this redistribution works; rather than calculate the difference between each family's disposable income and their gross primary income, they opted to isolate the variation in disposable income that could be attributed to the youngest member of each family where there is at least one child under the age of 25. The average increase in disposable income that this child contributes to his or her family amounts to in200 per month.     

The sensitivity of income polarization

This study looks at polarization and its components’ sensitivity to assumptions about equivalence scales, income definition, ethical income distribution parameters, and the income accounting period. A representative sample of Danish individual incomes from 1984 to 2002 is utilised. Results show that polarization has increased over time, regardless of the applied measure, when the last part of the period is compared to the first part of the period; primary causes being increased inequality (alienation) and faster income growth among high incomes relative to those in the middle of the distribution. Increasing the accounting period confirms the reduction in inequality found for shorter periods, but polarization is virtually unchanged, because income group identification increases. Applying different equivalence scales does not change polarization ranking for different years, but identification ranks are affected. The welfare state considerably reduces income polarization and inequality, but at the expense of some more identification.      

Social welfare,inequality, and poverty when needs differ

The paper examines income distributions of a finite population consisting of households which may differ with respect to needs. Since observed incomes are not directly comparable, income distributions have to be adjusted. Incomes are transformed to equivalent incomes interpreted as living standards and measured for a reference type, and the latter are supplemented by weights depending on needs. A general class of social welfare orderings (being based on adjusted rank-ordered income distributions) is characterized by a set of properties. Severe limitations for the form of the adjustment process are implied. The consequences for the measurement of inequality and poverty are demonstrated, and corresponding orderings are derived.