Relative Satisfaction and Welfare Maximizing Wealth Distribution:

Alex Coram; Lyle Noakes

doi:10.2202/1935-1704.1513

Published by De Gruyter November 23, 2009

Relative Satisfaction and Welfare Maximizing Wealth Distribution

Alex Coram and Lyle Noakes

From the journal The B.E. Journal of Theoretical Economics

https://doi.org/10.2202/1935-1704.1513

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Suppose individuals get utilities from the total amount of wealth they hold and from their wealth relative to those above and below them in a near neighbourhood. This paper studies the distribution of wealth that maximizes an additive welfare function made up of these utilities. It shows that the optimal distribution mostly requires an egalitarian solution if the concern is with those above. If the concern is with those below it has some unexpected properties.

Keywords: wealth distribution; positional goods; status; inequality; relative advantage

Published Online: 2009-11-23

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The B.E. Journal of Theoretical Economics

Volume 9 Issue 2

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Relative Satisfaction and Welfare Maximizing Wealth Distribution