Can a Reallocation of Initial Endowments Improve Social Welfare?
El Trimestre Económico, Vol. LXXV, pp. 125-133, 2008
11 Pages Posted: 18 May 2006 Last revised: 6 Mar 2018
Date Written: June 1, 2006
Abstract
In this paper we show that in a pure exchange economy where social weights and total resources are fixed there is no possibility to improve the social welfare by means of efficient reallocations of the resources. However, if social weights are not fixed but can be selected from a particular set, then it is possible to improve the social welfare along an efficient path. On the other hand we show that in an intertemporal economy, the possibility of improving the social welfare by a reallocation is strongly related with the level of intertemporal discount factor. In some particular cases it is possible, to improve social welfare by an intertemporal reallocation of resources. In addition, we show that it is possible to find a social rule to choose a walrasian equilibrium from an order relation defined on the set of social weights.
Keywords: Pareto efficiency, Walrasian Equilibrium, social welfare
JEL Classification: C61, D50, D60
Suggested Citation: Suggested Citation