Being up Front about Income Inequality
Résumé
This paper studies universal provision of information about the income inequality
involved in the creation of a good as a potential means of moderating society-level
income inequality. We show that supplying inequality information to consumers in
competitive markets leads to a reduction in overall income inequality, as long as a
portion of the population are extreme-inequality averse: they are willing to pay more
for goods whose production involves less extreme income inequality. Calibrating the
model with recent experimental evidence on these consumer attitudes suggests that
the reduction may be significant. Moreover, we show that the equilibrium under
information provision is socially efficient, whereas efficiency is lost in the absence of
information. Possibilities for implementation are also discussed.
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