Redistribution and Marginal Productivity Reward

Abstract

A fundamental ethical question is how a redistributive system should reward individual effort. Marginal productivity reward has been justified either as a way of ensuring efficiency or as a way of respecting people's self-ownership. Both these arguments have their limitations. We show that marginal productivity reward is implied by one intuitively appealing requirement on the reward structure, which we name non-negative reward. This result can be interpreted in one of two ways. It can be seen as a new justification of marginal productivity reward that avoids the limitations of the traditional arguments. Alternatively, it can be seen as a result showing that any redistributive system that makes transfers conditional on effort, sometimes will make the reward individuals get for their additional effort completely conditional on others effort. Finally, we also show that no genuine redistributive system satisfies both non-negative reward and the liberal requirement of no forced labour.

Citation

Cappelen, A.W. and Tungodden, B. (2007), "Redistribution and Marginal Productivity Reward", Lambert, P.J. (Ed.) Equity (Research on Economic Inequality, Vol. 15), Emerald Group Publishing Limited, Leeds, pp. 1-6. https://doi.org/10.1016/S1049-2585(07)15001-8