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Economics: Government Income Redistribution

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Introduction

There is inequality of income in any society at any given time due to several reasons. To

begin, the average worker earns little in their early years of employment, more in their middle

years, and then less in their retirement years. Consequently, a community with a wide age range

will have some degree of wealth disparity. There is also the fact that people have different

interests and desires. The ability to afford huge homes, fast vehicles and computers, luxurious

holidays, and provide for children and grandchildren motivate some people to work long hours.

These features depict the presence of economic inequality at any point in time. This paper

critically analyses the government's ability to distribute income, determining whether the

redistribution of income has a positive or negative impact on an economy and the country as a

whole.

After years of quasi-neglect, economic disparity has been the center of global policy

debate. There is growing tension in developed economies about the effects of technological and

globalization progress and the associated costs. In developing countries, where inequality is more

pronounced, the question is whether it represents a substantial impediment to decreasing poverty

and economic growth. Increased income equality and faster growth are possible outcomes of

income redistribution, especially in developing economies.

Economic disparity is arguably most distressing when it is not based on talent or effort

but is influenced by the conditions depicting a person's upbringing. Government policy, such as

public policy, carries out income redistribution to create a ladder of opportunities for individuals

with different backgrounds (Goerl & Seiferling, 2014). For instance, while one individual enters

a well-run grade learning institution or high school and attends a higher learning institution,

where parents support one's learning and other interests, supporting higher learning, a first house,
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and a first vehicle, and establishing job connections, leading to internships and employment. On

the other hand, another individual is admitted to a badly run and low-quality learning institution,

fails to afford higher learning costs, and does not have the support of their peers or family. There

is a good chance that these two individuals will have quite different economic achievements,

despite having similar talents and work ethics. Although these two individuals will not come

from the same families and attend the same learning institutions, public policy can attempt to

build a ladder of opportunities so that each individual has a fair opportunity to achieve an

economic specialty in the community regarding their efforts, talents, desires, and interests.

Through redistributive policies, people at the top of the income scale have a strong case

for moving resources to those at the bottom in states where growth is good but benefits the less

fortunate than well-off individuals. Reducing inequality while promoting long-term economic

growth and alleviating poverty can be achieved by providing better educational opportunities for

low-income children and paying for them with higher taxes (Yamamura, 2014). Neenan (1975)

asserts that in nations with high inequality, where political and social tensions are high or

populist regimes are on the rise, redistributive policies could potentially shrink the rich-poor

divide, enhancing positive economic impact.

Government redistributes income to enhance economic equality using instruments such

as taxation and income transfers. In the short run, the most effective method of reducing

economic disparity and poverty is higher taxes and government transfers to the poorest members

of society. When the benefits of growth are not distributed to the poor, these instruments are

ideal. In reality, most of the time, they are insignificant. Taxes on personal cash and income

benefit the poor in developing countries are about ten times lower than in industrialized

economies (Padovano et al., 2021). The usefulness of conditional cash transfer programs has
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shown that it is probable to send money to the needy in evolving economies efficiently.

Households receive money from these cash transfer programs if they meet certain criteria, such

as having their children have regular immunizations or attending school on a regular basis. The

right income redistribution instrument should be used in a particular situation for the maximum

benefit of society.

In conclusion, economic redistribution can help alleviate poverty by reducing income

disparity if it is done appropriately. Poor people will be able to invest more of their resources in

building human capital and physical assets, which could spur economic growth. Increasing

economic security and opportunity for the less fortunate is a primary goal of income

redistribution, which frequently includes funding for public services. Therefore, government

redistribution of income positively impacts economic equality and growth and creates

opportunities for less fortunate individuals. This government's income redistribution attempt

benefits the impacted individuals and the country's overall economic growth and development.
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References

Goerl, C.-A., & Seiferling, M. (2014). Income Inequality, Fiscal Decentralization and Transfer

Dependency.

Neenan, W. B. (1975). Income redistribution through local government fiscs. Madison:

University of Wisconsin.

Organisation for Economic Co-operation and Development. (2021). Government at a glance

2021.

Padovano, F., Scervini, F., & Turati, G. (2021). Comparing governments' efficiency at supplying

income redistribution. Constitutional Political Economy, 32(1), 68-97.

Yamamura, E. (2014). Trust in government and its effect on preferences for income

redistribution and perceived tax burden. Economics of Governance, 15(1), 71-100.

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