On Pareto-improving redistributions of aggregate economic gains (Q1085033)

This paper considers the existence and characterization of directions of tariff, commodity tax, and transfer payment reforms to ensure a Pareto improvement following a change in the economy's endowments, technology, preferences, or trading possibilities. Motzkin's theorem on the existence of solutions to dual sets of linear inequalities is extended to the case of non-homogeneous systems, and is applied to the comparative statics of the general equilibrium of a large trading economy. By allowing free disposal of commodities to the government, the problem of temporary inefficiency is eliminated.