Financial security

Why income redistribution through increased taxation easier said than done

Redistribution, Inequality, and Growth (PDF)
Jonathan D. Ostry, Andrew Berg, Charalambos G. Tsangarides, International Monetary Fund February 2014

Unfortunately, the referenced IMF paper is hampered by the prevalent economic theory that ‘growth’=socio-economic well-being. Off the top, the authors caution the inherent trade-off between economic growth and income redistribution, that the latter could impede the former.

Sure, some level of economic growth should be expected, to account for population growth for example. But even then there’s no guarantee such limited economic growth would go to that corresponding population.

Contrary to the what’s taught in some misleadingly titled (like ‘Theory of Economic Development’) graduate growth economics courses, growth ≠ prosperity for all. Stylised facts and cute aphorisms from over half a century ago aside, growth is not (if it ever was) evenly distributed between labour and capital, and ‘rising tides’ are not lifting all boats.

Leave a Reply

Your email address will not be published. Required fields are marked *