Threshold Level of Income in Income Distribution
University of Macau
October 5, 2010
A threshold level of income such as the poverty line and the minimum standard of living can exist in a first best income distribution. The social welfare function used in the model incorporates social value judgments of egalitarianism and individual desert. The social value of an individual income is greater the more deserving he is. The combination of the social objective of rewarding those who deserve and the objective of egalitarianism leads to a minimum standard of living for those individuals at the bottom of income distribution. The implication of the value judgments in income taxation is also discussed.
Number of Pages in PDF File: 12
Keywords: Desert, Responsibility, Minimum standard of living, Egalitarianism, Poverty
JEL Classification: I31, H2, K, K39working papers series
Date posted: October 7, 2010
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