Research | Projects

TRADE-OFF TRA EFFICIENZA ED EQUITÀ NELLA TEORIA DI RAWLS

Starting from Kaldor's (1957) seminal paper, a huge research effort has been devoted to the analysis of the impact of inequality on growth. While the neo-classical theory of economic growth was strictly concerned with the effect of income disparities on physical capital, the recent literature has been mostly focusing on the role of human capital as one of the key factors for a better understanding of inequality implications on growth, especially in advanced economies (e.g., Galor and Zeira 1993, Galor and Moav 2004).In this project we propose a reinterpretation of Rawls' Theory of Justice as Fairness (hereafter Theory), by which the causality between inequality, individual investments in human capital, and economic growth is modeled `behind the veil of ignorance'. Specifically, within our reinterpretation of the Theory, distributive aspects are assumed to impact on growth to the extent that the magnitude of (future) income inequalities is said to influence (ongoing) individual incentives to effort in education, and so productivity in the labor market.According to the common understanding of the Theory, an allocation is to bepreferred if and only if the `least-advantaged' individual is better off, independently from effciency issues; this is the main idea usually ascribed to the maximin principle as represented by the well known Leontief preferences (Alexander 1974). In our view, however, such interpretation would not leave any room for the Rawlsian Difference Principle, by which, it is said, once education opportunities are granted to the entire population, inequalities are admitted as far as they are to the greatest benefit of the least-advantaged. Evidently, in the absence of efficiency issues, there is no way by which the least-advantaged individual might be willing to be penalized by the introduction of inequality. As such, for any inequality to represent a benefit for the worse-off (i.e. least-advantaged), economic growth must be necessarily accounted for, that is, inequality must be stimulating growth in such a way as to make the least-advantaged, for some degree of inequality at least, more than compensated for being the worse-off. In a sense, inequality must be aimed at pro-poor growth.In this way of thinking, as stated by Rawls' in the premise of the Restatement published thirty years after the Theory (Rawls 2001), a revision of thecommon understanding of the Theory is necessary because, in our view, thisTheory goes well beyond the proposal of a distributive value judgment in sucha way as to embrace efficiency issues as well.