Inequality-Minimization with a Given Public Budget

Diskussionspapiere extern , 18 S.

Johannes König, Carsten Schröder

Berlin: Freie Univ. Berlin, FB Wirtschaftswiss., 2016, 18 S.
(Discussion Paper / School of Business & Economics ; 2016,16)

Abstract

We solve the problem of a social planner who seeks to minimize inequality via transfers with a fixed public budget in a distribution of exogenously given incomes. The appropriate solution method depends on the objective function: If it is convex, as in the case of the absolute mean deviation, it can be solved by an interior-point algorithm. If it is quasiconvex, as in case of the Gini coefficient, the bisection method can be used. We implement the procedures using artificial and real-world data, and show that the optimal transfer scheme need not comply with a transfer scheme that perfectly equalizes incomes at the bottom of the distribution.

Johannes König

Wissenschaftlicher Mitarbeiter in der Infrastruktureinrichtung Sozio-oekonomisches Panel

Carsten Schröder

Direktorium SOEP und Bereichsleitung Angewandte Panelanalysen in der Infrastruktureinrichtung Sozio-oekonomisches Panel



JEL-Classification: C61;D63;H23;H53;I38
Keywords: redistribution, public transfers, inequality, optimization methods, interior-point algorithm, bisection method
Externer Link:
http://edocs.fu-berlin.de/docs/receive/FUDOCS_document_000000025038
Frei zugängliche Version: (econstor)
http://hdl.handle.net/10419/144560