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Abstract: The impact of the paper “A Theory of Fairness, Competition and Cooperation” by Ernst Fehr and Klaus Schmidt (Quarterly Journal of Economics, 1999), has been tremendous, and the theory of inequity aversion has been widely used in varying fields of economics. Here, the merits of inequity aversion as a theory of fairness and as an explanation of human behavior are critically examined. I argue that the theory has weak points in both areas. First, it provides no deeper understanding of why and when people exhibit other-regarding preferences. Second, the outcome-based nature of the theory ignores the fundamental role of procedures, both in the theoretical literature on fairness, and in experiments regarding actual human behavior. Finally, I suggest an alternative way of understanding the puzzling behavior of humans in economic experiments, based on the potentially conflicting norms of individual property rights and social sharing. Many modern theories of fairness essentially amount to promoting an efficient mix of these two norms. [Copyright &y& Elsevier]

Objective. The objective of this article is to examine whether public expenditure on higher education has an effect on income inequality by increasing enrollment. Methods. Combining data from the World Bank Development Indicators with data from the World Income Inequality Database version 2, we study the relation between government education expenditure and enrollment rates, as well as the relation between government education expenditure and the change in income inequality during the 1980s and the 1990s. Results. We find that public expenditure on higher education has no positive effect on enrollment. Increased enrollment is mainly explained by higher GDP per capita. Using carefully selected Gini coefficients to ensure comparability over time, we do not find a robust relation between higher education expenditure and lower income inequality, contrary to some previous studies. Conclusions. Government expenditure on higher education has very limited effects on enrollment and inequality. This finding, however, does not imply that there are no social benefits from such subsidies. For example, in countries where high marginal tax rates decrease the economic returns to education, governments may wish to compensate for this through subsidies. [ABSTRACT FROM AUTHOR]

The author discusses the quantification of welfare state redistribution in Sweden. The author describes the standard method used to evaluate redistribution involving income distribution. The problems with the standard approach regarding its undercapacity to account for behavioral responses to welfare programs and to detect how political mechanisms change the structure of the welfare state beneficial for the middle class are also discussed.

Objective. The redistributive effect of the welfare state is traditionally measured by comparing the gross and net distribution of annual income among adults. This standard approach does not account for the fact that a large share of the taxes paid by adults are paid back to the very same individuals later in life. The objective of this article is to examine the factors that determine the difference between redistribution according to the standard approach and redistribution of lifetime incomes. I also discuss under what circumstances intra-individual redistribution is beneficial for low-income earners. Methods. A formal model of a simple welfare state in a society with low- and high-income earners is used to describe inequality of gross and net income among adults and for complete lifetime incomes. The model is calibrated with data describing the Swedish welfare state. Results. Theoretically, the redistribution of lifetime income can be bigger or smaller than the redistribution indicated by the standard approach. Swedish data suggest that most welfare states are more redistributive when a lifetime perspective is used compared to the standard approach. Conclusions. Most of the redistribution carried out by modern welfare states is so-called intra-individual redistribution. Compared to the situation that would arise without the welfare state, intra-individual redistribution is likely to be favorable for low-income earners because it compensates for inequalities in the distribution of assets and access to capital markets. [ABSTRACT FROM AUTHOR]