Monopolistic supply of sorting, inequality, and welfare
Why is an increase in income inequality often accompanied by an increase in socioeconomic segregation? And what are the welfare implications of this comovement? This paper uses a theoretical model to analyze the relationship between income inequality and socioeconomic segregation. It shows that rising inequality can trigger sorting according to income, as a monopolist's profits from offering sorting increase with income inequality. It also examines the relationship between sorting and social welfare and shows that profitâmaximizing sorting patterns are not necessarily optimal from a welfare perspective. In fact, for a broad field of income distributions (monopolist) profits increase with inequality, while at the same time total welfare from sorting decreases.
Year of publication: |
2021
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Authors: | Windsteiger, Lisa |
Published in: |
Journal of Public Economic Theory. - ISSN 1467-9779. - Vol. 23.2021, 5, p. 801-821
|
Publisher: |
Hoboken, NJ : Wiley |
Saved in:
freely available
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