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Welfare policies, relative income and majority choice: Welfare policies, relative income and majority choice

FitzRoy, Felix; Nolan, Michael

Authors

Felix FitzRoy

Dr Michael Nolan M.A.Nolan@hull.ac.uk
Senior Lecturer in Economics and HUBS Undergraduate Admissions Tutor



Abstract

In a model with heterogeneous workers, quasi‐linear utility and both intensive and extensive margins of employment, we investigate welfare with optimal linear taxes and wage subsidies under Rawlsian and utilitarian objectives, and the effects of concern for relative income. Relativity implies much higher optimal utilitarian taxes, but makes little difference to already very high optimal Rawlsian taxes. A substantial wage subsidy is generally optimal. We also consider the political economy of pairwise majority voting preferences for differing policies. Rawlsian redistribution is always defeated, though often by only a modest majority, while a constrained utilitarian policy, with equal transfers to unemployed and employed individuals—a universal basic income—wins a majority in all cases, which is robust to changes in the underlying productivity distribution.

Citation

FitzRoy, F., & Nolan, M. (2016). Welfare policies, relative income and majority choice: Welfare policies, relative income and majority choice. The Manchester school, 84(1), 81-94. https://doi.org/10.1111/manc.12083

Journal Article Type Article
Acceptance Date Jun 27, 2014
Online Publication Date Nov 3, 2014
Publication Date Jan 1, 2016
Deposit Date Dec 13, 2018
Journal The Manchester School
Print ISSN 1463-6786
Electronic ISSN 1467-9957
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 84
Issue 1
Pages 81-94
DOI https://doi.org/10.1111/manc.12083
Public URL https://hull-repository.worktribe.com/output/1152476
Publisher URL https://onlinelibrary.wiley.com/doi/full/10.1111/manc.12083