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The Openness-Equality Trade-Off in Global Redistribution

Vickrey (1945)’s veil-of-ignorance argument for redistributive taxation makes no mention of national borders, yet his model of optimal taxation has been almost exclusively applied within sovereign states. Because the majority of welfare-relevant inequality is across rather than within such states, a global perspective on optimal redistribution yields radically different conclusions. Taxes should be significantly higher than typical estimates and most transfers should flow across national borders. If such transfers are infeasible, migration becomes a natural substitute. Yet much migration, by the global middle class to well-off countries, actually exacerbates inequality. Countries very open to inequality-reducing migration are staggeringly unequal internally; a leading case is the Gulf Cooperation Council monarchies. Such examples suggest a philosophically disturbing trade-off between openness to global inequality-reducing migration and internal equality. For example, social prejudices based on national origin or authoritarian regimes that support a caste system could be Pareto-improving.



E. Glen Weyl, Microsoft Research New England
Publication Date: 
October, 2014
Publication Type: