Optimal control of inequality under uncertainty
Martin Forster
, , Peter Lambert
2014, Mathematical Social Sciences, 68, pp.53-59
Abstract
We onsider the optimal ontrol of inequality under unertainty, with a partiular fous on inome inequality. For an eonomy experiening eonomi growth and random shoks, we show how a simple loss and `bequest' funtion may be ombined to guide the expeted level of inequality towards a pre-dened target within a nite planning horizon. Closed form solutions show that, the stronger the shoks to the inome distribution, the more aggressive is poliy. We disuss the results in the ontext of reent applied and poliy literature on soial inequality, globalisation and eonomi instability