Tag Archives: Frontier

Efficiency versus Equity

On VoxEU, Torben Andersen and Jonas Maibom point out that empirical findings of a positive correlation between efficiency and equity need not contradict elementary theoretical predictions.

The trade-off [between efficiency and equity] applies at the frontier of the possibility set of combinations of economic performance and income equality available to policy makers. If policies and institutions are ‘well-designed’, the country is at the frontier. There is no free lunch and a trade-off inevitably arises.

However, there may be many historical, institutional and political reasons why countries are not at the frontier. … in which case there is scope for improvements in both economic performance and income equality.

This insight leaves one important message. In cross-country comparisons … differences in the distance to the frontier should be accounted for …