Events at CERGE-EI

Speaker: Achim Wambach (This email address is being protected from spambots. You need JavaScript enabled to view it.)

Title: "When Money Shouldn’t Buy" (joint work with Katharina Huesmann, University of Münster)

Abstract: Banning money in markets for goods like education or health is a common policy to prevent unfair access by the wealthy. We investigate if this policy is a well-targeted instrument for its intended goal. To do so we introduce a fairness criterion called discrimination-freeness which requires that goods are allocated independent of wealth. Using a model where willingness to pay increases with income, we find the answer depends critically on the level of wealth inequality. When inequality is high, a transfer ban is a well-aligned policy. In this case, a ban on money is no more restrictive than the goal of preventing discrimination itself. The resulting allocations are constrained-efficient meaning that any Pareto improvement would be discriminatory. When inequality is low, this alignment can break down. A simple transfer ban can be overly restrictive, as using monetary transfers may improve outcomes without causing wealth-based discrimination. Our findings suggest that societies with more equitable wealth distribution may have more flexibility to use price mechanisms than those with high inequality.

Meeting link: https://cerge-ei.webex.com/cerge-ei/j.php?MTID=m176670d75989ce78def19d5ed8fe06be

Meeting number: 2741 392 3500

Meeting password: 835139