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Micro-economic Theory
- Publisher
- Springer Journals
- Copyright
- 1997 Japanese Economic Association
- ISSN
- 1352-4739
- eISSN
- 1468-5876
- DOI
- 10.1111/1468-5876.00045
- Publisher site
- See Article on Publisher Site
Abstract
Abstract In general, an economic reform wins unanimous support only if it incorporates a scheme of compensation. It is widely believed that (a) all lump-sum compensations: (i) have impractical information requirements about the technology of firms and the preferences of households, or (ii) are not manipulation-proof. (b) Non-lumpsum compensations constitute feasible alternatives. Further to the dissenting views of Kemp and Wan, this note makes two points: The first is that in a realistic model with overlapping generations, there is a lump-sum compensation scheme which is manipulation-proof. The second is that the presence of multiple equilibria may create havoc for a non-lumpsum compensation scheme. In real life, we have no information to rule out multiplicity.
Journal
The Japanese Economic Review – Springer Journals
Published: Jun 1, 1997
Keywords: economics, general; microeconomics; macroeconomics/monetary economics//financial economics; econometrics; development economics; economic history