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Getting to a feasible income equality

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  • Ji-Won Park
  • Chae Un Kim
Abstract
Income inequality is known to have negative impacts on an economic system, thus has been debated for a hundred years past or more. Numerous ideas have been proposed to quantify income inequality, and the Gini coefficient is a prevalent index. However, the concept of perfect equality in the Gini coefficient is rather idealistic and cannot provide realistic guidance on whether government interventions are needed to adjust income inequality. In this paper, we first propose the concept of a more realistic and feasible income equality that maximizes total social welfare. Then we show that an optimal income distribution representing the feasible equality could be modeled using the sigmoid welfare function and the Boltzmann income distribution. Finally, we carry out an empirical analysis of four countries and demonstrate how optimal income distributions could be evaluated. Our results show that the feasible income equality could be used as a practical guideline for government policies and interventions.

Suggested Citation

  • Ji-Won Park & Chae Un Kim, 2020. "Getting to a feasible income equality," Papers 2011.09119, arXiv.org, revised Mar 2021.
    • Handle: RePEc:arx:papers:2011.09119
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    References listed on IDEAS

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    Cited by:

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    4. Balisacan, Arsenio M. & dela Cruz, Russel Matthew M., 2021. "When a Pandemic Strikes: Balancing Health and Economy toward Sustainable and Inclusive Recovery," MPRA Paper 111259, University Library of Munich, Germany.

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