Measuring Unfair Inequality: The Case of Japan

Great interests have been shown to the subject of inequality in several countries. We used to measure income inequality by using equivalence household income. However, this method of comparing other household’s welfare becomes insignificant when we consider the utility or endogenous the utility of child.

　　　　　In these days, it is admitted that preference heterogeneity poses ethical questions that challenge standard objective function.Recent literature has proposed an inequality measuring structure that allows for alternative viewpoints of what is a fair income distribution. Almas et.al (2011) introduced the implications of responsibility- sensitive theories of justice for evaluating the income distribution. This theory considers that income inequality caused by individual responsibility should be considered into “fairness”. They evaluate income redistribution by comparing pre-tax unfair indicates and post-tax ones. However, does the aim of income redistribution system to close the post-tax income to the fair income which is defended by only their own responsibility?

　　　　　The purpose of this paper is to discuss how unfair income inequality reflects the welfare in Japan by testing following hypothesis: measuring unfair inequality by defending income distribution included “responsibility-sensitive theories of justice”, measuring unfair inequality by fair income included social responsibility and estimating the effect of non-responsibility variables, such as family background or birth.

　　　　　Previous literatures shows that there are clear differences between European countries and U.S. with respect to the attitude towards income inequality, social belief for social responsibilities and preference for redistribution. Esping-Andersen classified Japanese welfare system as “hybrid”. Studying Japan as case study can generalize the current literature and lay the foundations for future study on this topic. This results could be useful to propose optimal taxation considering not only personal responsibility also social responsibility in order to solve unfair inequality.

Reference

Almås, Ingvild & Cappelen, Alexander W. & Lind, Jo Thori & Sørensen, Erik Ø. & Tungodden, Bertil, 2011. "Measuring unfair (in)equality," Journal of Public Economics, vol. 95(7-8), pp. 488-499