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This short note asks where support for decentralization of taxation and spending decisions should come from in an economy with both inter- and intra-regional inequality. If an informational advantage makes local governments more efficient spenders, it follows that decentralization will imply higher taxes, ceteris paribus. Individual support for decentralization will thus depend on both individual and mean regional wealth levels, as well as on intra-regional inequalities. Support for centralized decision-making (which implies lower taxes) will rise with wealth. It declines with the relative mean wealth level of a person's region (to avoid redistribution to other regions). For the rich, it rises with the inequality level of their own region (to prevent the local median voter from demanding high taxes).

This paper relies on a model of wealth distribution dynamics and occupational choice to investigate the distributional consequences of policies and developments associated with transition from central planning to a market system. The model suggests that even an efficient privatization designed to be egalitarian may lead to increases in inequality (and possibly poverty), both during transition and in the new steady‐state. Creation of new markets in services also supplied by the public sector may also contribute to an increase in inequality, as can labour market reforms that lead to a decompression of the earnings structure and to greater flexibility in employment. The results underline the importance of retaining government provision of basic public goods and services; of removing barriers that prevent the participation of the poor in the new private sector; and of ensuring that suitable safety nets are in place.

Building on earlier work by political philosophers, economists have recently sought to define a concept of equity that accommodates the fairness of reward to individual responsibility and effort, while allowing for the existence of some inequalities which are unfair and should be compensated. This paper – commissioned as a chapter for the Oxford Handbook of Well Being and Public Policy – provides a critical review of the economic literature on equality and inequality of opportunity. A simple 'canonical model' of equal opportunity is proposed, and used to explore the two fundamental concepts in this (relatively) new theory of social justice: the principles of compensation and reward. Ex-ante and ex-post versions of the compensation principle are presented, and the tensions between them are discussed. Different approaches to the measurement of inequality of opportunity – and empirical applications – are reviewed, and implications for the measurement of poverty and of the rate of economic development are discussed.

This paper analyses the efficiency consequences of lobbying in a production economy with imperfect commitment. We first show that the Pareto efficiency result found for truthful equilibria of common agency games in static exchange economies no longer holds under these more general conditions. We construct a model of pressure groups where the set of e.cient truthful common-agency equilibria has measure zero. Equilibria are generally inefficient as a direct result of the existence of groups with conflicting interests, which allocate real resources to lobbying. If lobbies representing "the poor " and "the rich " have identical organizational capacities, we show that these equilibria are biased towards the poor, who have a comparative advantage in politics, rather than in production. If the pressure groups di.er in their organizational capacity, both pro-rich (oligarchic) and pro-poor (populist) equilibria may arise, all of which are inefficient with respect to the constrained optimum.

Does more education really mean less poverty and less inequality? How much less? And what are the transmission mechanisms? This paper presents the results of a microsimulation exercise for the Brazilian State of Ceará, which suggests that broad-based policies aimed at increasing educational attainment would have substantial impacts on poverty reduction, but muted effects on inequality. While these results are highly dependent on assumptions about the behaviour of returns to education for the distribution of earnings, they are much more robust for the distribution of household income per capita. Over half of the poverty reducing effect of more education operate through greater incentives for labour force participation among the poor, and through reductions in fertility. Both of these effects operate largely through decisions made by poor women. – education ; poverty ; inequality