Skip to main content
Article thumbnail
Location of Repository

Equity Criteria as Instrument to Ensure Sustainability of Pareto or Kaldor-Hicks Efficiency: A Correlation Hidden by Sources of Confounding as Key for Sorting Out the Global Economic Crisis

By Piero Benazzo


The hypothesis is that Pareto and Kaldor-Hicks Efficiency have an aspect of sustainability in relation to inequality. The analysis finds efficient situations reached increasing inequality as diminishing in the long term effective demand in a larger measure than counterbalancing increases thanks to total factor productivity growth. Equity and efficiency in welfare economics, rather than being quite contrasting objectives, are as such related and mutually necessary. As such countries are called to implement redistributive policies together with Kaldor-Hicks movements. These would make some parts of the economic agents less well off, while they would reinstate effective demand on the demand side. This latter increases output and wealth throughout the economy for all economic agents in general. Redistributive policies increase also imports, benefiting third countries and remunerating therefore their potential free-rider behaviour. The concerned demand side policies, requiring cooperation and redistribution, call the international institutions to coordinate their action for harmonizing such policies and restrain free-rider behaviour.

Topics: E12 - Keynes; Keynesian; Post-Keynesian, D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement, I31 - General Welfare, D33 - Factor Income Distribution, C0 - General, O33 - Technological Change: Choices and Consequences; Diffusion Processes, E01 - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts, E21 - Consumption; Saving; Wealth, D31 - Personal Income, Wealth, and Their Distributions, D61 - Allocative Efficiency; Cost-Benefit Analysis, A10 - General, O11 - Macroeconomic Analyses of Economic Development, B40 - General, J31 - Wage Level and Structure; Wage Differentials, O43 - Institutions and Growth, F02 - International Economic Order, E19 - Other, O12 - Microeconomic Analyses of Economic Development
Year: 2010
OAI identifier:

Suggested articles

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.