Wealth redistribution, Economic growth
It is known that redistributing wealth from the rich to the poor tends to increase consumption in an economy. This is because when people’s incomes are lower they typically spend a larger percent of that income. This increase in consumption, however, must be accompanied by an equivalent decrease in savings, if savings equals investment. And if investment is the mechanism by which an economy grows, this must therefore have an effect on the growth of that economy. This paper deals strictly with the effects on long-term economic growth brought about by a change in income distribution. The purpose of this work is to examine some of the often overlooked long term effects that an increase in spending of this type could have on the economy. In particular, the adverse effect on the growth rate of capital (and thereby output) and the danger of an economy approaching a steady state with zero output.
Freimuth, Mike, "Income Distribution and Economic Growth" (2005). WWU Honors Program Senior Projects. 174.
Subjects - Topical (LCSH)
Income distribution; Economic development
student projects; term papers
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