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Distributional Neutral Welfare Ranking-Extending Pareto Principle

Marjit, Sugata and Sarkar, Sandip (2016): Distributional Neutral Welfare Ranking-Extending Pareto Principle.

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Abstract

We extend standard Pareto criterion for welfare ranking in terms of inequality. We suggest strongly Pareto superior or SPS allocations which are inequality neutral but guarantee higher welfare for everyone. The purpose is to entertain the idea that rising inequality is a major welfare concern and hence one must go beyond standard Pareto superior (PS) allocations that necessarily lead to greater inequality. In the main result of this paper we show that whenever there is aggregate gain in net utility then there exists counterfactual allocation which is eventually a SPS allocation.

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