Should Income Inequality Be Praised? Multiple Public Goods Provision, Income Distribution and Social Welfare

39 Pages Posted: 12 Jan 2017

See all articles by Jun-ichi Itaya

Jun-ichi Itaya

Hokkaido University - Division of Modern Economics and Management

Atsue Mizushima

Otaru University of Commerce

Date Written: November 2016

Abstract

We investigate how income inequality affects social welfare in a model of voluntary contributions to multiple pure public goods. Itaya, de Meza, and Myles (1997) show that the maximization of social welfare precludes income equality in a single pure public good model. In contrast, we show that the result of Itaya et al. may not be valid in a case of multiple voluntarily supplied public goods; specifically, we show that not only an income inequality-raising redistribution policy but also an income-equalizing one may raise social welfare. We also show that if altruistically motivated voluntary transfers are allowed, an inequality-raising redistribution policy is no longer effective and leaves social welfare unchanged.

Keywords: public goods, inequality, social welfare, voluntary provision, income distribution

JEL Classification: D310, D630, D640, H230, H310

Suggested Citation

Itaya, Jun-ichi and Mizushima, Atsue, Should Income Inequality Be Praised? Multiple Public Goods Provision, Income Distribution and Social Welfare (November 2016). CESifo Working Paper Series No. 6215. Available at SSRN: https://ssrn.com/abstract=2897490

Jun-ichi Itaya (Contact Author)

Hokkaido University - Division of Modern Economics and Management ( email )

Sapporo 060-0809
Japan

Atsue Mizushima

Otaru University of Commerce ( email )

3-5-21 Midori
Otaru-shi, Hokkaido 047-8501
United States

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