Pareto-improving income redistribution: expanding consumer access to the vaccines market

Abstract

Economic theory has proved that income redistribution in imperfectly competitive markets can increase social welfare and lead to Pareto-improving situations. This paper shows that, under certain assumptions, self-financing tax subsidy schemes can have Pareto-improving effects also in a competitive framework. This result is achieved by exploiting external economies of scale, resulting in a decrease in price along with an increase in output. The case of the vaccines industry and World Health Organization initiatives are examined to illustrate the theoretical analysis.