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The Journal of Economic Inequality

, Volume 16, Issue 4, pp 607–629 | Cite as

Inequality-minimization with a given public budget

  • Johannes KönigEmail author
  • Carsten Schröder
Article

Abstract

We solve the problem of a social planner who seeks to minimize inequality via transfers with a fixed public budget in a distribution of exogenously given incomes. The appropriate solution method depends on the objective function: If it is convex, it can be solved by an interior-point algorithm. If it is quasiconvex, the bisection method can be used. Using artificial and real-world data, we implement the procedures and show that the optimal transfer scheme need not comply with a transfer scheme that perfectly equalizes incomes at the bottom of the distribution.

Keywords

Redistribution Public transfers Inequality Optimization methods Interior-point algorithm Bisection method 

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.School of Business and EconomicsFreie Universität BerlinBerlinGermany
  2. 2.SOEP at DIW BerlinBerlinGermany

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