ABSTRACT
As economists have long recognized, the marginal utility of $42 to the average citizen of a poor country is likely to be much higher--in terms of education, health, or life expectancy--than would be the loss of $150 to the average rich country citizen. The effects of redistribution on incentives, or on the structure of the economic system, are extremely hard to calculate and subject to great, often essentially ideological, debate. Even with a large margin for error in the estimates, income transfers from rich to poor countries would produce much greater gains in human welfare in the lower end of the spectrum than they would impose losses at the upper. In a new analysis, Norman Alcock and Gernot Kohler report that both synchronic and diachronic analyses show virtually the same relationship between wealth increments and life expectancy. The relationship is much stronger for poor countries than for rich ones, but very similar, within each subgroup, whether examined diachronically or synchronically.
