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Optimal inequality ...
Abstract
Ämnesord
Stäng
- In Rawls’ (A theory of justice. Harvard University Press, Cambridge, 1971) influential social contract approach to distributive justice, the fair income distribution is the one that an individual would choose behind a veil of ignorance. Harsanyi (J Polit Econ 61:434–435, 1953, J Polit Econ 63:309–332, 1955, Am Polit Sci Rev 69:594–606, 1975) treated this situation as a decision under risk and arrived at utilitarianism using expected utility theory. This paper investigates the implications of applying cumulative prospect theory instead, which better describes behavior under risk. I find that the specific type of inequality in bottom-heavy right-skewed income distributions, which includes the log-normal income distribution, could be perceived as desirable. This optimal inequality result contrasts the implications of other social welfare criteria.
Ämnesord
- SAMHÄLLSVETENSKAP -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)
- SOCIAL SCIENCES -- Economics and Business -- Economics (hsv//eng)
Nyckelord
- Veil of ignorance
- Prospect theory
- Social welfare function
- Income inequality
Publikations- och innehållstyp
- ref (ämneskategori)
- art (ämneskategori)
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